**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB**


(Mark
      One)


þ
            
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**




**For
      the quarterly report period ended June 30, 2006**


o
            
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**




**For
      the transition period from** **o** **to** **o**


**Commission
      File Number: 333-109903**




**SUB-URBAN
      BRANDS, INC.**


(Exact
      name of small business issuer specified in its charter)


**NEVADA**
            
            **47-0926492**(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                Employer Identification No.)




**8723
      Bellanca Ave, Bldg A, Los Angeles, CA 90045**


(Address
      of Principal Executive Offices)




**(310) 670-0132**


Issuer’s
      telephone number, including area code




**2222
      E. Washington Blvd. Suite B, Los Angeles, CA 90021**


(Former
      name, former address and former fiscal year, if changed since last
      report)




Check
      whether the issuer (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
      preceding 12 months (or for such shorter period that the registrant was
      required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days. Yes þ No o




**APPLICABLE
      ONLY TO CORPORATE ISSUERS**




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: As of August 22, 2006 there were 49,251,703
      common shares outstanding.










TABLE
                OF CONTENTSPART
                I — FINANCIAL INFORMATIONITEM
                1. CONSOLIDATED FINANCIAL STATEMENTSITEM
                2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
                OPERATION
            
            24ITEM
                3. CONTROLS AND PROCEDURES
            
            41PART
                II — OTHER INFORMATION
            
            42ITEM
                1. Legal Proceedings
            
            42ITEM
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            
            42ITEM
                3. Defaults Upon Senior Securities
            
            43ITEM
                4. Submission of Matters to a Vote of Security Holders
            
            43ITEM
                5. Other Information
            
            43ITEM
                6. Exhibits
            
            43SIGNATURES
            
            44Exhibit
                4.1Exhibit
                4.2Exhibit
                4.3Exhibit
                10.1Exhibit
                10.2Exhibit
                31.1Exhibit
                31.2Exhibit
                32.1Exhibit
                32.2









**** **SUB-URBAN
      BRANDS, INC. AND SUBSIDIARY**


**FORMERLY
      KNOWN AS DP&D, INC.**


**CONSOLIDATED
      BALANCE SHEET**


**AS
      OF JUNE 30, 2006**





ASSETS





**June
                30, 2006**
              **Unaudited**Current
                AssetsCash
                and cash equivalents
            
            $
            155,333Accounts
                receivable, net of allowance for doubtful accounts of $243
            
            
            4,614Inventory,
                net of inventory reserves of $2,269
            
            
            166,134Prepaid
                expenses and advances
            
            
            81,569Loan
                Guarantee
            
            
            54,628Total
                Current Assets
            
            
            462,278Property
                and Equipment (net of accumulated depreciation)
            
            
            7,715Deposits
            
            
            5,350Total
                Assets
            
            $
            475,343





See
      accompanying notes.


1




**SUB-URBAN
      BRANDS, INC. AND SUBSIDIARY**


**FORMERLY
      KNOWN AS DP&D, INC.**


**CONSOLIDATED
      BALANCE SHEETS**


**AS
      OF JUNE 30, 2006**





LIABILITIES
      AND SHAREHOLDERS’ DEFICIT





**Unaudited**
              **June
                30, 2006**Current
                LiabilitiesAccounts
                payable
            
            $
            397,162Accrued
                salary, and benefits
            
            
            184,719Accrued
                expenses
            
            
            29,620Accrued
                interest
            
            
            153,868Warrant
                liabilities
            
            
            675,770Convertible
                secured notes payable - net of unamortized debt discounts
            
            
            297,926Convertible
                notes payable - net of unamortized debt discounts
            
            
            1,505,448Notes
                payable
            
            
            151,394Total
                Current Liabilities
            
            
            3,395,907Long
                Term Liabilities
            
            
            —Long
                Term Liabilities
            
            
            —Total
                Liabilities
            
            
            3,395,907Shareholders’
                deficitPreferred
                Stock, $0.001 par value, 10 million shares authorized; none issued
                or
                outstanding
            
            
            —Common
                stock, $0.001 parvalue
                (190,000,000 shares authorized; 49,185,687 shares issued and outstanding
                at June 30, 2006)
            
            
            49,186Additional
                paid-in-capital
            
            
            5,606,528Accumulated
                deficit
            
            
            (8,576.278
            )Total
                Shareholders’ Deficit
            
            
            (2,920,564
            )Total
                Liabilities and Shareholders’ Deficit
            
            $
            475,343





See
      accompanying notes.


2




**SUB-URBAN
      BRANDS, INC. AND SUBSIDIARY**


**FORMERLY
      KNOWN AS DP&D, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**THREE
      AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005**


**(UNAUDITED)**





**Three
                Months Ended**
              **June
                30,**
            
            **Six
                Months Ended**
              **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenue
            
            $
            16,358
            
            $
            81,883
            
            $
            25,037
            
            $
            103,967Cost
                of revenue
            
            
            (8,972
            )
            
            (68,265
            )
            
            (12,603
            )
            
            (80,740
            )Gross
                profit
            
            
            7,386
            
            
            13,618
            
            
            12,434
            
            
            23,227Operating
                ExpenseSelling
                expense
            
            
            230,159
            
            
            74,622
            
            
            389,178
            
            
            149,684Product
                development
            
            
            72,335
            
            
            34,295
            
            
            115,643
            
            
            67,180General
                and administrative expense
            
            
            1,122,029
            
            
            376,827
            
            
            1,549,828
            
            
            572,288Total
                Operating Expense
            
            
            1,424,523
            
            
            485,744
            
            
            2,054,649
            
            
            789,152Gain
                (Loss) from operations
            
            
            (1,417,137
            )
            
            (472,126
            )
            
            (2,042,215
            )
            
            (765,925
            )Other
                Income (Expense)Interest
                expense
            
            
            (880,346
            )
            
            (42,613
            )
            
            (1,040,977
            )
            
            (79,024
            )Accretion
                of Series A Preferred Stock to redemption value premium
            
            
            473,987
            
            
            (67,713
            )
            
            406,275
            
            
            (135,425
            )Loan
                Guarantee
            
            
            (163,884
            )
            
            —
            
            
            (273,139
            )
            
            —Charge
                related to beneficial conversion features
            
            
            (264,353
            )
            
            (22,293
            )
            
            (281,791
            )
            
            (48,301
            )Total
                Other Income (Expense)
            
            
            (834,596
            )
            
            (132,619
            )
            
            (1,189,632
            )
            
            (262,750
            )Net
                Income (Loss)
            
            
            (2,251,733
            )
            
            (604,745
            )
            
            (3,231,847
            )
            
            (1,028,675
            )Loss
                per weighted average share of common
              stock
                outstanding - basic and diluted
            
            $
            (0.06
            )
            $
            (0.02
            )
            $
            (0.10
            )
            $
            (0.09
            )Weighted
                average shares outstanding - basic and diluted
            
            
            38,619,250
            
            
            25,571,004
            
            
            33,164,734
            
            
            24,833,983





See
      accompanying notes.


3





**Condensed
                Consolidated Statements of Operations****(Unaudited)****(Continued)****Three
                months ended June 30,**
            
            **Six
                months ended June 31,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Includes
                the following amounts related to share-based compensation expense
                for
                stock options:General
                and administrative
            
            $
            206,701
            
            $
            120,750
            
            $
            341,489
            
            $
            120,750—
            
            
            
            
            
            —Total
            
            $
            206,701
            
            $
            120,750
            
            $
            341,489
            
            $
            120,750





See
      accompanying notes.


4




****SUB-URBAN
      BRANDS, INC. AND SUBSIDIARY****


**FORMERLY
        KNOWN AS DP&D, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **SIX
        MONTHS ENDED JUNE 30, 2006 AND 2005**
 **Six
                    months ended June 30, 2006**
                
                
                **Six
                    months ended June 30, 2005**Cash
                    flows from operating activities:Net
                    loss
                
                $
                (3,231,847
                )
                $
                (1,028.675
                )Adjustments
                    to reconcile net loss to net cash
                  provided
                    by (used for) operating activities:Depreciation
                    and amortization
                
                
                2,164
                
                
                1,952Preferred
                    stock redemption accretion
                
                
                (200,473
                )
                
                135,425Loss
                    on notes payable conversion price
                
                
                108,803
                
                
                48,301Amortization
                    of discount on notes payable
                
                
                916,627
                
                
                9,741Option
                    compensation expense
                
                
                341,489
                
                
                120,750Issuance
                    of warrants for services
                
                
                349,953
                
                
                77,576Issuance
                    of warrants and common stock for loan guarantee
                
                
                273,139Adjustment
                    for common stock issued as collateral
                
                
                
                
                
                30,000Preferred
                    stock beneficial conversion adjustments
                
                
                172,988Changes
                    in operating assets and liabilities:(Increase)
                    decrease in accounts receivable
                
                
                3,307
                
                
                12,301(Increase)
                    decrease in inventory
                
                
                (114,492
                )
                
                63,607(Increase)
                    decrease in prepaid expenses and other current assets
                
                
                (64,862
                )
                
                (8,478
                )(Increase)
                    in deposits
                
                
                1,600(Increase
                    ) in other receivables
                
                
                (16,670
                )Increase
                    in accounts payable
                
                
                100,520
                
                
                59,803Increase
                    in accrued salary, and related benefits
                
                
                16,747
                
                
                48,176Increase
                    (decrease) in accrued expenses
                
                
                (84,848
                )
                
                17,467Increase
                    in accrued interest
                
                
                (10,892
                )
                
                69,156Net
                    cash used for operating activities
                
                
                (1,436,747
                )
                
                (342,898
                )Cash
                    flows from investing activities:Purchase
                    of property and equipment
                
                
                (6,587
                )
                
                --Net
                    cash used for investing activities
                
                
                (6,587
                )Cash
                    flows from financing activities:Proceeds
                    from secured credit financingProceeds
                    from secured convertible notes payable
                
                
                750,000Proceeds
                    from convertible notes payable
                
                
                1,274,600
                
                
                328,100Payments
                    on convertible notes payable
                
                
                (427,800
                )Proceeds
                    from notes payable to related party
                
                
                
                
                
                29,525Payments
                    on notes payable to related party
                
                
                
                
                
                (450
                )Net
                    cash provided by financing activities
                
                
                1,596,800
                
                
                357.176Net
                    increase (decrease) in cash and cash equivalents
                
                
                153,466
                
                
                14,278Cash
                    and cash equivalents, beginning of year
                
                
                1,867
                
                
                12,582Cash
                    and cash equivalents, end of year
                
                $
                155,333
                
                $
                26,860**Supplemental
                    disclosures of cash flow information:**Cash
                    paid during the period for:Interest
                
                $
                18,234
                
                $
                --$
                18,234
                
                $
                --
  See
        accompanying notes.




5




**SUB-URBAN
        BRANDS, INC. AND SUBSIDIARY**
 **FORMERLY
        KNOWN AS DP&D, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **SIX
        MONTHS ENDED JUNE 30, 2006 AND 2005**
 
 (Continued)
  **Supplemental
        disclosures of non-cash transactions:**
 
 During
        the six months ended June 30, 2006, the Company entered into the following
        non-cash transactions:
 
 •
              $1,076,101
                  for the conversion of 2,167,910 shares of preferred stock for 2,859,863
                  shares of its restricted common
                  stock
 •
              $910,931
                  for the conversion of convertible notes payable plus accrued interest
                  into
                  3,012,325 share of its restricted common
                  stock
 •
              $14,500
                  for the issuance of 14,500,000 shares of $0.001 par value its restricted
                  common stock in connection with our reverse
                  merger
 •
              $250,000
                  for the issuance of 1,000,000 shares of its restricted common stock
                  and
                  $77,768 for 1,000,000 warrants for a loan guarantee
 •
              $441,525
                  for the issuance of 4,260,000 warrants for
                  services
 
 During
        the six months ended June 30, 2005, the Company entered into the following
        non-cash transactions:
 
 •
              $77,364
                  for the issuance of common stock for consulting
                  services;
 
 
 
 
 See
        accompanying notes.




6




**SUB-URBAN
      BRANDS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


JUNE
      30,
      2006





**1.**  **Significant
      Accounting Policies**





Description
      of the Company





**Formation
      and Business of the Company:**





Sub-Urban
      Brands, Inc. (“SUB”) was incorporated in Nevada on March 1, 2001 under the name
      DP&D, Inc. (“DPD”). On May 11, 2006, Sub-Urban Brands, Inc., (formerly known
      as "DP&D, Inc.) acquired all the outstanding shares of Sub-Urban Industries,
      Inc. ("SUI"), pursuant to a share exchan agreement (the “Share Exchange
      Agreement”) in exchange for 31,673,363 restricted shares of its common stock in
      a reverse merger (the "Merger"). Pursuant to the Share Exchange Agreement,
      the
      shareholders of SUI immediately prior to the Merger received one share of DPD
      common stock for each share of Company common stock they held, or an aggregate
      of 31,673,363 **** shares
      of
      DPD common stock. These shares represented approximately 68.6% **** of
      the
      46,173,363 shares of DPD common stock outstanding immediately following the
      Merger. The acquisition has been accounted for as a reverse merger
      (recapitalization) with SUI deemed to be the accounting acquirer. Accordingly,
      the historical financial statements presented herein are those of SUI, as
      adjusted to give effect to any difference in the par value of the issuer's
      and
      the accounting acquirer's stock with an offset to capital in excess of par
      value, and those of Sub-Urban Brands, Inc., since the Merger. The retained
      earnings of the accounting acquirer have been carried forward after the
      acquisition and SUI's basis of its assets and liabilities were carried over
      in
      the recapitalization. Operations prior to the business combination are those
      of
      the accounting acquirer.





For
      purposes of these financial statements, references to the "Company" shall mean
      Sub-Urban Brands, Inc., and its wholly owned legal subsidiary SUI.





SUI,
      a
      privately-held California corporation, was incorporated March 24, 2003 to
      develop and promote several lifestyle apparel brands. Sub-Urban designs, sells
      and markets apparel (Shirts, Outerwear, Sweatshirts, T-shirts and Accessories)
      and pursues intellectual property to develop for the retail apparel and
      accessories market. Sub-Urban leads its product line with the Mash Culture
      Lab Ô ,
      and
      WHITEBOY Ô brands,
      which has been adopted in the “urban”, “street” and “board” apparel markets.
      Production and distribution of products are outsourced.





**Merger
      of Sub-Urban Brands, Inc, and Sub-Urban Industries, Inc.:**





SUI
      completed a reverse merger transaction on May 11, 2006 with DP&D, Inc., a
      Nevada corporation formed on March 1, 2001. As of May 11, 2006, the effective
      date of the merger, DPD had no amount of assets and liabilities. Effective
      with
      the merger, the directors and management of SUI became the directors and
      management of DPD. SUI has been considered the acquirer in this transaction,
      frequently referred to as a “reverse merger” of a shell company, and accounted
      for as a recapitalization. Accordingly, no goodwill or other adjustment in
      basis
      of assets is recorded. The shares of the shell, the legal surviving entity,
      are
      treated as issued as of the date of the transaction, and the shares held by
      the
      controlling shareholders after the transaction, are treated as outstanding
      for
      the entirety of the reporting periods. DPD was formed as a full-service provider
      of consulting services for weddings, holy unions and anniversaries. It had
      not
      commenced business operations as of May 11, 2006, and had no assets or
      liabilities. Pursuant to the reorganization, the controlling shareholders became
      DPD’s controlling shareholders.




On
      April
      27, 2006, the Company changed its corporate name from DPD, Inc. to Sub-Urban
      Brands, Inc., and its trading symbol to SUUB.OB. SUI currently remains a wholly
      owned subsidiary of Sub-Urban Brands, Inc. The Company stock is quoted and
      traded on the NASDAQ OTC Bulletin Board.





Basis
      of Presentation





The
      accompanying unaudited interim condensed consolidated financial statements
      have
      been prepared in accordance with generally accepted accounting principles in
      the
      United States of America and the rules and regulations of the Securities and
      Exchange Commission for interim financial information filed on Form 10QSB.
      Accordingly, they do not include all the information and footnotes necessary
      for
      a comprehensive presentation of financial position and results of operations.
      It
      is management's opinion, however, that all adjustments (consisting of normal
      recurring adjustments) have been made which are necessary for a fair financial
      statement presentation. The results for the interim period are not necessarily
      indicative of the results to be expected for the year. These unaudited interim
      condensed financial statements should be read in conjunction with the Current
      Report on Form 8-K, dated May 15, 2006 file #06843060, containing audited
      financial statements of the accounting acquirer (SUI) as of and for the two
      years ended December 31, 2005 and 2004, and the following amendments to that
      Form 8K, as form 8K/A amendment #1, filed June 23, 2006 file #06922265, and
      Form
      8K/A amendment #2 filed June 26, 2006 file #06924643.





**Basis
      of Consolidation**





The
      consolidated condensed financial statements include the accounts of Sub-Urban
      Brands, Inc., and its wholly owned subsidiary Sub-Urban Industries, Inc. All
      significant inter-company balances and transactions have been eliminated.





7





Stock
      Splits





On
      December 16, 2005, SUI’s board of directors declared a two-for-one stock split
      of the common stock to be distributed in the form of a stock dividend on or
      about December 31, 2005, to holders of record as of December 16, 2005. In 2004
      SUI’s board of directors declared a 2.67-for-one stock split of the common
      stock, to be distributed in the form of a stock dividend on or about August
      16,
      2004, to holders of record on August 16, 2004. In addition, all references
      in
      the financial statements and notes to financial statements, to weighted average
      number of shares, per share amounts, and market prices of the Company’s common
      stock have been restated to give retroactive recognition to the stock split.





Use
      of
      Estimates





The
      preparation of these financial statements requires the Company to make estimates
      and judgments that affect the reported amounts of assets, liabilities, revenues
      and expenses. The Company evaluates its estimates on an on-going basis,
      including those related to provisions for doubtful accounts, reserve for charge
      backs, inventories, valuation of stock, valuation of options, analysis of
      deferred taxes and provision for income taxes, contingencies and litigation.
      The
      Company bases its estimates on historical experience and on various other
      assumptions that are believed to be reasonable under the circumstances, the
      results of which form the basis for making judgments about the carrying values
      of assets and liabilities that are not readily apparent from other sources.
      Actual results may differ from these estimates.





Cash
      and Cash Equivalents





For
      purposes of the statement of cash flows, cash equivalents include all highly
      liquid debt instruments with original maturities of three months or less which
      do not secure any corporate obligations.





Fair
      Value of Financial Instruments





The
      Company’s financial instruments, none of which are held for trading, are cash
      and cash equivalents, accounts receivable, other receivables, accounts payable,
      notes payable and long-term debt (mandatorily redeemable preferred stock).
      The
      recorded values of cash and cash equivalents, accounts receivable, and accounts
      payable approximate their fair values based on their short-term nature. The
      recorded values of notes payable and long-term debt (mandatorily redeemable
      preferred stock) approximate their fair values, as the interest approximates
      market rates.





Accounts
      Receivable





The
      Company extends credit to customers whose sales invoices have not been
      collateralized in the Company’s secured accounts receivable financing program,
      based upon an evaluation of the customer’s financial condition and credit
      history and generally requires no collateral. Management performs regular
      evaluations concerning the ability of its customers to satisfy their obligations
      and records a provision for doubtful accounts based on these evaluations. The
      Company’s allowance for doubtful accounts was $243 at June 30,
      2006.





Inventory





Inventory
      is valued at the lower of cost or market, cost being determined by the first-in,
      first-out method. The Company’s inventory consists solely of finished goods. The
      Company continually evaluates its inventories by assessing slow moving products.
      Market value of inventory is estimated based on historical sales trends for
      individual product lines, the impact of market trends, an evaluation of economic
      conditions and review of current sales orders.





Reserves
      for obsolescence were reduced by $19,770 during the six months ended June 30,
      2006, due to inventory written off.





**Convertible
      Debt Financing and Derivative Liabilities**





The
      Company evaluates each convertible debenture issued in accordance with Statement
      of Financial Accounting Standards No. 133, "Accounting for Derivative
      Instruments and Hedging Activities," as amended ("SFAS 133"), the holder's
      conversion right provision, potential liquidated damages clause, and the reset
      option (collectively, the debt features) contained in the terms governing the
      Notes are not clearly and closely related to the characteristics of the Notes.
      Accordingly, the features qualified as embedded derivative instruments at
      issuance and, because they do not qualify for any scope exception within SFAS
      133, they were required by SFAS 133 to be accounted for separately from the
      debt
      instrument and recorded as derivative financial instruments.





If
      the
      holders of the Notes and Warrants have registration rights that require the
      Company to file a registration statement with the Securities and Exchange
      Commission to register the resale of the common stock issuable upon conversion
      of the Convertible Notes or the exercise of the Warrants. Under EITF No. 00-19, *Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company's Own Stock* ,
      the
      ability to register stock is deemed to be outside of the Company's control.
      Accordingly, the initial fair value of the Warrants and the initial fair value
      of the embedded derivatives (i.e., conversion feature) are recorded as an
      accrued warrant liability and conversion feature liability in the consolidated
      balance sheet, and are marked to market at the end of each reporting
      period.





8





In
      June
      2005, the Financial Accounting Standards Board Emerging Issues Task Force issued
      EITF 05-04, "The Effect of a Liquidated Damages Clause on a Freestanding
      Financial Instrument Subject to EITF Issue No. 00-19, Accounting for Derivative
      Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
      Stock”. Under EITF 05-04, liquidated damages clauses may qualify as freestanding
      financial instruments for treatment as a derivative liability. Furthermore,
      EITF
      05-04 addresses the question of whether a registration rights agreement should
      be combined as a unit with the underlying financial instruments and be evaluated
      as a single instrument. EITF 05-04 doesn’t reach a consensus on this question
      and allows for treatment as a combined unit (Views A and B) as well as separate
      freestanding financial instruments (View C). On September 15, 2005, the FASB
      staff postponed further discussion of EITF 05-04. As of June 30, 2006, the
      FASB has still not rescheduled EITF 05-04 for discussion.





In
      conjunction with the issuance of the Company’s senior and convertible debentures
      and the related warrants and registration rights, the Company adopted View
      A of
      EITF 05-04. Accordingly, the registration rights agreements, the warrants
      associated with the senior and convertible debentures, the debentures
      themselves, as well as certain features of the debentures were evaluated if
      they
      are free standing financial instruments. This treatment resulted in
      classification of the warrants and certain features of the debentures as either
      liability or equity while the registration rights agreements and other features
      of the debentures were treated as combined embedded derivative liabilities.
      Derivative liability treatment requires adjusting the carrying value of the
      instrument to its fair value at each balance sheet date and recognizes any
      change since the prior balance sheet date as a component of other
      income/(expense). The recorded value of such derivative liabilities can
      fluctuate significantly based on fluctuations of the market value of the
      underlying securities of the Company, as well as on the volatility of the
      Company’s stock price during the term used for observation and the term
      remaining for the underlying financial instruments. The debt features of the
      debentures and associated warrants previously classified as equity or liability
      are evaluated as a combined unit with the registration rights agreements. This
      combination will result in these instruments being treated as derivative
      liabilities requiring periodic reevaluation of fair value with potentially
      significant fluctuation in fair value from period to period.





In
      September 2005, the Financial Accounting Standards Board Emerging Issues Task
      Force issued EITF 05-08, "Income Tax Consequences of Issuing Convertible Debt
      with a Beneficial Conversion Feature." EITF 05-08 is e ffective
      for financial statements beginning in the first interim or annual reporting
      period beginning after December 15, 2005. There is no material impact from
      the
      adoption of EITF 05-08 on the unaudited
      condensed consolidated financial position, results of operations, or cash
      flows. ****





In
      September 2005, the Financial Accounting Standards Board Emerging Issues Task
      Force issued EITF 05-02, "The Meaning of 'Conventional Convertible Debt
      Instrument' in EITF Issue No. 00-19, 'Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company's Own Stock.'"
      EITF 05-02 is effective for new instruments entered into and instruments
      modified in reporting periods beginning after June 29, 2005. There is
      no material impact from the adoption of EITF 05-02 on the unaudited
      condensed consolidated financial position, results of operations, or cash
      flows. ****





In
      September 2005, the Financial Accounting Standards Board Emerging Issues Task
      Force issued EITF 05-07,
      "Accounting for Modifications to Conversion Options Embedded in Debt Instruments
      and Related Issues."EITF
      05-7
      is effective for future modifications of debt instruments beginning in the
      first
      interim or annual reporting period beginning after December 15,
      2005.We do
      not expect there to be a material impact from the adoption of EITF 05-07 on
      ourunaudited
      condensedconsolidated financial position, results of operations, or cash
      flows.****





**Commitments
      and Contingencies**





Legal
      Actions





The
      Company is periodically involved in legal actions and claims that arise as
      a
      result of events that occur in the normal course of operations. The Company
      is
      not currently aware of any formal legal proceedings or claims that the Company
      believes will have, individually or in the aggregate, a material adverse effect
      on the Company's financial position or results of operations.





*Mandatorily
      Redeemable Convertible Preferred Stock, Series A of SUI*





SUI
      had
      issued 2,167,910 shares of mandatorily redeemable Series A Convertible Preferred
      Stock in 2004, and it had an aggregate liquidation value of $812,552. The
      liquidation value, plus accrued but unpaid dividends, is payable on
      July
      1, 2007, the
      mandatory redemption date. In addition, each share of preferred stock is
      convertible, at any time, at the option of the holder into the right to receive
      shares of the Company’s common stock. Initially, each share was convertible at
      an adjusted conversion price of $0.375 per share of common stock, subject to
      adjustment in the event of certain dividends and distributions; a merger,
      consolidation, or sale of substantially all of the Company’s assets; liquidation
      or distribution; and certain other events. Pursuant to SFAS Statement No. 150, *Accounting
      for Certain Financial Instruments with Characteristics of Both Liabilities
      and
      Equity* ,
      mandatorily redeemable preferred stock is reported as a long-term liability
      prior to it being converted.





9





On
      May
      10, 2006, the holders of the preferred stock agreed to convert the preferred
      stock of $812,552, plus accrued dividends of $90,894, into 2,859,863 shares
      of
      common stock at a conversion adjusted price of approximately $0.3159 per share.





Comprehensive
      Income (Loss)





Comprehensive
      loss consists of net loss and other gains and losses affecting shareholders’
equity that, under generally accepted accounting principles are excluded from
      net loss in accordance with Statement of Financial Accounting Standards No.
      130,
“Reporting Comprehensive Income.” The Company, however, does not have any
      components of other comprehensive loss as defined by SFAS No. 130 and therefore,
      for the three and six months periods ended June 30, 2006 and 2005, comprehensive
      loss is equivalent to the Company’s reported net loss. Accordingly, a separate
      statement of comprehensive loss is not presented.





Revenue
      Recognition





The
      Company recognizes revenue upon the delivery of its product to its customers.
      The Company charges shipping and handling costs for inventory and sales items
      to
      cost of sales and inventory. Shipping costs recovered from customers is recorded
      as freight revenue and included in net sales. Revenue is recorded net of an
      allowance for estimated returns, price concessions, and other discounts. Such
      allowance is reflected as a reduction to accounts receivable when the Company
      expects to grant credits for such items; otherwise, it is reflected as a
      liability.





The
      Company recognizes revenue only when all of the following criteria have been
      met:





l
            Persuasive
                evidence of an arrangement exists;


l
            Delivery
                has occurred or services have been
                rendered;


l
            The
                fee for the arrangement is fixed or determinable;
                and


l
            Collectibility
                is reasonably assured.





*Persuasive
      Evidence of an Arrangement* —
The
      Company documents all terms of an arrangement in a written contract or purchase
      order signed by the customer prior to recognizing revenue.





*Delivery
      Has Occurred* —
      Products are considered delivered upon delivery to a customer’s designated
      location.





*The
      Fee for the Arrangement is Fixed or Determinable* —
Prior
      to recognizing revenue, the amount is either fixed or determinable under the
      terms of the written contract or purchase order. The amount recognized as
      revenue is negotiated at the outset of the arrangement and is not subject to
      refund or adjustment during the initial term of the arrangement.





*Collectibility
      is Reasonably Assured* —
The
      Company determines that collectibility is reasonably assured prior to
      recognizing revenue. Collectibility is assessed on a customer-by-customer basis
      based on criteria outlined by management. New customers are subject to a credit
      review process, which evaluates the customer’s financial position and ultimately
      its ability to pay. The Company does not enter into arrangements unless
      collectibility is reasonably assured at the outset. Existing customers are
      subject to ongoing credit evaluations based on payment history and other
      factors. If it is determined during the arrangement that collectibility is
      not
      reasonably assured, revenue is recognized on a cash basis.





Advertising





The
      Company expenses advertising costs as incurred, consisting primarily of
      advertising at events, placement in multiple print and internet publications,
      along with design, production and printing costs of sales materials. Advertising
      expense for the six-months ended June 30, 2006, and 2005 amounted to $160,961
      and $8,649, respectively.





Stock-
      Based Compensation





*Equity
      Incentive Plan*





The
      Company has an Equity Incentive Plan (“Plan”) under which officers, key
      employees, consultants, and non-employee directors may be granted options to
      purchase shares of the Company’s authorized but un-issued common stock. The
      maximum number of shares of the Company’s common stock available for issuance
      under the Plan at June 30, 2006 is 15,883,353 million shares (see Note
      10).





Prior
      to
      December 31, 2005, the Company had elected to follow Financial Accounting
      Standards Board Statement No. 123 (Accounting for Stock-Based Compensation)
      in
      accounting for its employee and non-employee stock options. Accordingly, the
      Company determined compensation costs based on the fair value at the grant
      date
      for its stock options using the Black-Scholes valuation method. The
      Black-Scholes option valuation model was developed for estimating the fair
      value
      of traded options that have no vesting restrictions and are fully transferable.
      Because option valuation models require the use of subjective assumptions,
      changes in these assumptions can materially affect the fair value of the
      options. The Company’s options do not have the complete characteristics of
      traded options. The option valuation models do not necessarily provide a
      reliable measure of the fair value of its options (see Note 10). Effective
      January 1, 2006, the Company has adopted the fair value based method of
      accounting prescribed in FASB Statement of Financial Accounting Standards No.
      123 ( *Accounting
      for Stock-Based Compensation* )/No.
      123R ( *Share-Based
      Payment* )
      for its
      employee stock option plans.





10





Share-based
      Compensation Expense





Effective
      January 1, 2006, the Company adopted the provisions of Statement of Financial
      Accounting Standards No. 123 (revised 2004), Share-Based Payment, or SFAS
      123(R), which requires the measurement and recognition of compensation expense
      for all share-based payment awards made to employees and directors, including
      stock options issued under the New Plan. The financial statements as of June
      30,
      2006 and for the three and six months ended June 30, 2006, reflect the effect
      of
      SFAS 123(R). In accordance with the modified prospective transition method,
      the financial statements for prior periods have not been restated to reflect,
      and do not include, the impact of minor differences between SFAS 123 and SFAS
      123(R). Share-based compensation expense recognized is based on the value of
      the
      portion of share-based payment awards that is ultimately expected to vest.
      Share-based compensation expense recognized in our Unaudited Condensed
      Consolidated Statements of Operations during the three and six months ended
      June
      30, 2006, included compensation expense for share-based payment awards granted
      prior to, but not yet vested as of, December 31, 2005 based on the grant date
      fair value estimated in accordance with the provisions of SFAS 123 and
      compensation expense for the share-based payment awards granted subsequent
      to
      January 1, 2006 based on the grant date fair value estimated in accordance
      with the provisions of SFAS 123(R). In conjunction with the adoption of SFAS
      123(R), we elected to attribute the value of share-based compensation to expense
      using the straight-line attribution method. Share-based compensation expense
      related to stock options was $206,701 and $341,489, before taxes on earnings
      for
      the three and six months ended June 30, 2006, respectively. During the
      three
      and six months ended June 30, 2005, share-based compensation expense related
      to
      stock options are recognized under the fair value method in accordance with
      SFAS
      123. See Note 10 to the Condensed Consolidated Financial Statements for
      additional information.





Upon
      adoption of SFAS 123(R), we elected to continue valuing the Company’s
      share-based payment awards granted after January 1, 2006 using the Black-Scholes
      option-pricing model, which the Company previously used for the recognition
      of
      compensation expense required under SFAS 123. The Black-Scholes model was
      developed for use in estimating the fair value of traded options that have
      no
      vesting restrictions and are fully transferable. The Black-Scholes model
      requires the input of certain assumptions. The Company’s options have
      characteristics significantly different from those of traded options, and
      changes in the assumptions can materially affect the fair value estimates.
      The
      determination of fair value of share-based payment awards on the date of grant
      using the Black-Scholes model is affected by the stock price as well as the
      input of other subjective assumptions. These assumptions include, but
      are
      not limited to the expected term of stock options and expected stock price
      volatility over the term of the awards





The
      expected term of stock options represents the weighted-average period the stock
      options are expected to remain outstanding. The expected term is based on the
      observed and expected time to post-vesting exercise and forfeitures of option
      by
      our employees. Upon the adoption of SFAS 123(R), management determined the
      expected term of stock options using the simplified method as allowed under
      SAB107. Prior to January 1, 2006, the Company determined the expected term
      of
      stock options based on the expected life of the option. Upon adoption of SFAS
      123(R), The Company used average historical volatility of two publicly traded
      companies in the apparel business, measured over a period equal to the option
      expected terms in deriving its expected volatility assumption as allowed under
      SFAS 123(R) and SAB 107. Prior to January 1, 2006, the Company had also used
      historical stock price volatility in accordance with SFAS 123 for purposes
      of
      recognizing compensation expense. The risk-free interest rate assumption is
      based upon observed interest rates appropriate for the term of the Company’s
      stock options and warrants. The dividend yield assumption is based on history
      and expectation of dividend payouts.





As
      share-based compensation expense recognized in the Unaudited Condensed
      Consolidated Statements of Operations for the three and six months ended June
      30, 2006, is based on awards ultimately expected to vest, it should have been
      reduced for estimated forfeitures. However, based on the Company’s relatively
      short history, the Company does not expect any forfeitures. SFAS 123(R) requires
      forfeitures to be estimated at the time of grant and revised, if necessary,
      in
      subsequent periods if actual forfeitures differ from those estimates. As
      required under SFAS 123 for the periods prior to January 1, 2006, the Company
      accounted for forfeitures as they occurred. If factors change and the Company
      will employ different assumptions in the application of SFAS 123(R) in future
      periods, the compensation expense that the Company recorded under SFAS 123(R)
      may differ significantly from what was recorded in the
      current period. At June 30, 2006 there is of total unrecognized compensation
      expense related to stock options granted under the plan of $545,799. This
      unrecognized compensation expense is expected to be recognized over a weighted
      average period of 1.5 years .





*Warrants*





The
      Company accounts for stock warrants issued to third parties in accordance with
      the provisions of the Emerging Issues Task Force (EITF) Issue No. 96-18, *Accounting
      for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling Goods or Services* ,
      and
      EITF 01-9, *Accounting
      for Consideration Given by a Vendor to a Customer (Including a Reseller of
      the
      Vendor’s Products)* .
      Under
      the provisions of EITF 96-18, because none of the Company’s agreements have a
      disincentive for nonperformance, the Company records a charge for the fair
      value
      of the portion of the warrants earned from the point in time when vesting of
      the
      warrants becomes probable. Final determination of fair value of the warrants
      occurs upon actual vesting. EITF 01-9 requires that the fair value of certain
      types of warrants issued to customers be recorded as a reduction of revenue
      to
      the extent of cumulative revenue recorded from that customer.





11





Recent
      Accounting Pronouncements





In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAF No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”.  SFAS No. 155, permits fair value remeasurement for any
      hybrid financial instrument that contains an embedded derivative that otherwise
      would require bifurcation, clarifies which interest-only strips and
      principal-only strips are not subject to the requirements of SFAS No. 133,
      establishes a requirement to evaluate interest in securitized financial assets
      to identify interests that are freestanding derivatives or that are hybrid
      financial instruments that contain an embedded derivative requiring bifurcation,
      clarifies that concentrations of credit risk in the form of subordination are
      not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition
      on the qualifying special-purpose entity from holding a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument.  This statement is effective for all financial
      instruments acquired or issued after the beginning of the Company’s first fiscal
      year that begins after September 15, 2006.





In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets” (“SFAS 156”). SFAS 156 addresses the accounting for recognized servicing
      assets and servicing liabilities related to certain transfers of the servicer’s
      financial assets and for acquisitions or assumptions of obligations to service
      financial assets that do not relate to the financial assets of the servicer
      and
      its related parties. SFAS 156 requires that all recognized servicing assets
      and
      servicing liabilities are initially measured at fair value, and subsequently
      measured at either fair value or by applying an amortization method for each
      class of recognized servicing assets and servicing liabilities. SFAS 156 is
      effective in fiscal years beginning after September 15, 2006. The adoption
      of
      SFAS 156 is not expected to have a material impact on our consolidated financial
      statements.





In
      June
      2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
      in
      Income Taxes—an interpretation of FASB Statement No. 109 (FIN 48). FIN 48
      provides guidance for the recognition, derecognition and measurement in
      financial statements of tax positions taken in previously filed tax returns
      or
      tax positions expected to be taken in tax returns. FIN 48 requires an entity
      to
      recognize the financial statement impact of a tax position when it is more
      likely than not that the position will be sustained upon examination. If the
      tax
      position meets the more-likely-than-not recognition threshold, the tax effect
      is
      recognized at the largest amount of the benefit that is greater than fifty
      percent likely of being realized upon ultimate settlement. The Corporation
      will
      be required to adopt FIN 48 as of January 1, 2007, with any cumulative effect
      of
      the change in accounting principle recorded as an adjustment to opening retained
      earnings. The Corporation is currently evaluating the impact of FIN 48 and
      has
      not yet determined the effect on its earnings or financial position




**2.**  **Liquidity
      and Capital Resources**





The
      accompanying financial statements have been prepared on a going-concern basis,
      which contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. The Company incurred net
      losses of $3,231,847, and $1,028,675 for the  six-months
      ended June 30,
      2006 and 2005, respectively, and had negative operating cash flows
      of $1,436,747 and $342,898 for
      the respective periods. The Company incurred net losses of $2,641,125, for
      the
      year ended December 31, 2005, and had negative operating cash flows of $914,598
      for the period. These factors raise substantial doubt about the Company’s
      ability to continue as a going concern. In view of the matters described above,
      recoverability of a major portion of the recorded asset amounts shown in the
      accompanying balance sheets is dependent upon the Company’s ability to generate
      sufficient sales volume to cover its operating expenses and to raise sufficient
      capital to meet its payment obligations. Management is taking action to address
      these matters, which include:





•
            Retention
                of experienced management personnel with particular skills in the
                development and commercialization of MASH CULTURE LABÔand the WHITEBOYÔbrand of products.


•
            The
                Company is developing new customers and sales
                channels.


•
            The
                Company is seeking investment capital through bridge financing and
                a
                private placement offering.





Management
      plans to obtain revenues from product sales, but as of June 30, 2006, there
      were
      no significant commitments for purchases of any of the WHITEBOY Ò or the
      recently launched MASH CULTURE LAB Ô products. In the absence of significant sales and profits, the Company may
      seek
      to raise additional funds to match its working capital
      requirements.





Historically,
      management has been able to raise additional capital. Subsequent to June 30,
      2006, the Company obtained an additional $550,000 in capital. The proceeds
      were
      used for working capital and design and production for the 2006 and 2007 MASH
      CULTURE LABÔ ’ and
      WHITEBOY â product-line. The financial statements do not include any adjustments relating
      to the recoverability and classification of recorded asset amounts, or amounts
      and classification of liabilities that might be necessary should the Company
      be
      unable to continue in existence.





12





The
      successful outcome of future activities cannot be determined at this time and
      there is no assurance that if achieved, the Company will have sufficient funds
      to execute its intended business plan or generate positive operating
      results.





In
      an
      effort to address the above issues, the Company is focused on continuing its
      revenue growth and raising additional capital. Although the Company believes
      that it will obtain the additional financing, there is no assurance that such
      financing will be available in the amount or on the terms necessary to sustain
      the Company’s operations.





Additionally,
      The Company is a specialty urban apparel brand of fashionable and contemporary
      apparel and accessory items designed for consumers with a young, active
      lifestyle. The Company’s success is largely dependent on its ability to gauge
      the fashion tastes of its customers and to provide merchandise that satisfies
      customer demand. The Company’s failure to anticipate, identify, or react to
      changes in fashion trends could adversely affect its results of
      operations.





**3.**  **Basic
      and Diluted Loss Per Share**





In
      accordance with SFAS No. 128, “Earnings Per Share,” the basic loss per share is
      computed by dividing the loss attributable to common stockholders by the
      weighted average number of common shares outstanding during the period. Basic
      net loss per share excludes the dilutive effect of stock options or warrants
      and
      convertible notes. Diluted net loss per share was the same as basic net loss
      per
      share for all periods presented, since the effect of any potentially dilutive
      securities is excluded, as they are anti-dilutive due to the Company’s net
      losses.





The
      following table sets forth the computation of basic and diluted net loss per
      common share:





**Three
                months ended**
            
            **Six
                months ended****June
                30,**
            
            **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**NumeratorNet
                loss available to common shareholders
            
            $
            (2,251,733
            )
            $
            (604,745
            )
            $
            (3,231,847
            )
            $
            (1,028,675
            )DenominatorWeighted
                average common shares outstanding
            
            
            38,619,250
            
            
            25,571,004
            
            
            33,164,734
            
            
            24,833,983Total
                shares, basic
            
            
            38,619,250
            
            
            25,571,004
            
            
            33,164,734
            
            
            24,833,983Net
                loss per common share:Basic
                and diluted
            
            $
            (0.06
            )
            $
            (0.02
            )
            $
            (0.10
            )
            $
            (0.04
            )





The
      potential shares, which are excluded from the determination of basic and diluted
      net loss per share as their effect is anti-dilutive, are as
      follows:




**June
                30,****2006**Secured
                promissory notes convertible to common stock
            
            
            
            
            3,000,000Promissory
              Notes convertible to common stock (1)
            
            
            
            
            
            
            7,322,312Options
              to purchase common stock
            
            
            
            
            
            
            10,638,587Warrants
              to purchase common stock (2)
            
            
            
            
            
            
            24,632,245Potential
              equivalent shares excluded
            
            
            
            
            
            
            45,593,144




(1)
        Consists of convertible promissory notes issued in 2004 with a principal
        of
        $250,000 with a conversion adjustment feature, convertible into 891,587 shares
        of common stock, and convertible promissory notes with a principal of $1,533,800
        convertible into 6,430,725 shares of common stock.
 
 (2)
        Consists of 943,643 warrants issued in 2003 and 2004 with a conversion
        adjustment feature, convertible into 1,887,284 shares of common stock, and
        warrants convertible into 22,744, 960 shares of: common stock.


**4.**  **Property
      and Equipment**





At
      June
      30, 2006,property and equipment consisted of the following:





**June**
              **30,
                2006**Computers
                and other equipment
            
            $
            16,117Furniture
                and fixtures
            
            
            2,379Machinery
                & equipment
            
            
            612Total
                property and equipment
            
            
            19,108Less:
                accumulated depreciation
            
            
            (11,393
            )Property
                and equipment, net
            
            $
            7,715


13





Depreciation
      expense for the three and six-months ended June 30, 2006 was $1,407 and $2,164,
      respectively, and is included as a component of general and administrative
      expenses in the accompanying financial statements.





**5.** **Notes
      Payable**





Details
      of Debentures





Debt
      consists of the following at June 30, 2006 and December 31, 2005:





**Jun
                30, 2006**
            
            **December
                31, 2005**Convertible
                notes payable - Secured
            
            $
            750,000
            
            $
            —Discount
                on convertible notes payable - Secured
            
            
            (452,074
            )
            
            —Convertible
                notes payable
            
            
            1,783,800
            
            
            1,733,100Conversion
                features adjustment liability
            
            
            446,201
            
            
            89,157Discount
                on convertible notes payable
            
            
            (724,552
            )
            
            (39,688
            )Convertible
                note payable - net
            
            
            1.803,375
            
            
            1,782,569Non-convertible
                notes payable
            
            
            151,393
            
            
            151,260Related
                party notes payable
            
            
            —
            
            
            —Total
                debt
            
            
            1,954,768
            
            
            1,933,829Less:
                current portion
            
            
            (1,954,768
            )
            
            (1,933,829
            )Long-term
                debt, less current portion
            
            $
            —
            
            $
            —





Convertible
      Notes Payable





Schedule
      of Convertible Notes Payable at June 30, 2006


Convertible
                  Notes Payable - Secured
              
              Convertible
                  Notes Payable
              
              Total
                  convertible Notes PayableBalance
                  at December 31, 2005
              
              $
              0
              
              
              1,733,100
              
              
              1,733,100New
                  financing arrangements
              
              
              750,000
              
              
              1,274,600
              
              
              2,024,600Note
                  conversions to common stock
              
              
              0
              
              
              (796,100
              )
              
              (796,100
              )Note
                  principal repayments
              
              
              0
              
              
              (427,800
              )
              
              (427,800
              )Balance
                  at June 30, 2006
              
              $
              750,000
              
              $
              1,783,800
              
              $
              2,533,800




*Debt
      Issued with Stock Purchase Warrants─Fair Value of Warrants Recorded as a
      Liability*





In
      May
      and June 2006, the Company issued unsecured promissory notes in the aggregate
      principal amount of $300,000 (the Notes) and warrants to purchase the Company's
      common stock (the Warrants) to qualified buyers and accredited investors. The
      Notes bear interest at a rate of 10%, mature on May and June of 2007, and are
      convertible into 1,200,000 shares of the Company's common stock at a conversion
      price of $0.25 per share. The difference between the conversion price and the
      fair market value of the common stock on the commitment date (transaction date)
      resulted in a beneficial conversion feature recorded of $395,751. The associated
      Warrants are exercisable for 1,260,000 shares of common stock at an exercise
      price of $0.25 per share. The Warrants, which expire three years after issuance,
      were assigned a value of $359,943, estimated using the Black-Scholes valuation
      model. The following assumptions were used to determine the fair value of the
      Warrants using the Black-Scholes valuation model: a term of three years,
      risk-free rate of 4.99 to 5.24%, volatility of 43.85%, and dividend yield of
      zero. In accordance with EITF No. 00-27, Application of Issue No. 98-5 to
      Certain Convertible Instruments, the values assigned to both the Notes and
      the
      Warrants were allocated based on their relative fair values. The discounts
      on
      the Notes for the beneficial conversion feature and the Warrants are being
      amortized to interest expense, using the effective interest method, over the
      term of the Notes. Total interest expense recognized relating to the beneficial
      conversion feature and the Warrants discount was $441,765 during the period
      ended June 30, 2006. The holders of the Notes and Warrants have registration
      rights that require the Company to file a registration statement with the
      Securities and Exchange Commission to register the resale of the common stock
      issuable upon conversion of the Notes or the exercise of the Warrants. Under
      EITF No. 00-19, Accounting for Derivative Financial Instruments Indexed to,
      and
      Potentially Settled in, a Company's Own Stock, the ability to register stock
      is
      deemed to be outside of the Company's control. Accordingly, the initial fair
      value of the Warrants of $359,943 was recorded as an accrued warrant liability
      in the consolidated balance sheet, and is marked to market at the end of each
      reporting period. There was no material change was marked as of the end of
      the
      reporting period.





14





*Debt
      Issued with Stock Purchase Warrants ─ Fair Value of Warrants Recorded as
      Additional Paid-in Capital*





In
      the
      six month period ending June 30, 2006, the Company issued $2,024,600 of new
      convertible securities in private placements to qualified buyers and accredited
      investors investment units consisting of notes and warrants. The fair value
      of
      the warrants at the time of issuance, which was determined using the
      Black-Scholes option-pricing model, was recorded as additional paid-in capital
      and reduced the carrying value of the Notes. The discount on the Notes is being
      amortized to interest expense over the term of the Notes.





a)
      In
      January 2006, a convertible note financing arrangement in the amount of $25,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in March
      2007, and in connection with this financing issued a 1 year warrant for the
      purchase of 100,000 shares at a price of $0.25. The note plus accrued interest
      was repaid in February 2006.





b)
      In
      January 2006, a convertible note financing arrangement in the amount of $3,600,
      convertible at $0.25 per share, with interest at 10% per annum, due in January
      2007, and in connection with this financing issued a 3 year warrant for the
      purchase of 14,000 shares at a price of $0.25. The note plus accrued interest
      was converted in May 2006.





c)
      In
      February 2006, a convertible note financing arrangement in the amount of $1,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in August
      2006, and in connection with this financing issued a 3 year warrant for the
      purchase of 4,000 shares at a price of $0.25.





d)
      In
      February 2006, a convertible note financing arrangement in the amount of
      $500,000, convertible at $0.25 per share, with interest at 10% per annum due
      in
      August 2006, and in connection with this financing, issued a i) 2 year warrant
      for the purchase of 2,000,000 shares at a price of $0.25, ii) in April 2006
      a 2
      year warrant for the purchase of 2,000,000 shares at a price of $0.25, iii)
      in
      connection with this financing, as compensation for a third party’s guarantee,
      issued 1,000,000 shares of common stock, and a 2 year warrant for the purchase
      of 1,000,000 shares of common stock at an exercise price of $0.25 per share.





e)
      In
      April 2006, a secured convertible note financing arrangement in the amount
      of
      $750,000, convertible at $0.25 per share, with interest at 10% per annum, due
      in
      April 2007, and in connection with this financing issued i) a 3 year warrant
      for
      the purchase of 3,000,000 shares at a price of $0.25 ii) a 9 month unit purchase
      warrant consisting of a right to purchase 3,000,000 shares of Sub-Urban common
      stock at a price of $0.25 per share by January 18, 2007, plus a 3 year warrant
      for the purchase of 1,500,000 shares of common stock at an exercise price of
      $0.50 per share.





f)
      In May
      2006, a convertible note financing arrangement in the amount of $295,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in May
      2007,
      and in connection with this financing issued i) a 3 year warrant for the
      purchase of 1,180,000 shares at a price of $0.25 ii) a 9 month unit purchase
      warrant consisting of a right to purchase 1,180,000 shares of Sub-Urban common
      stock at a price of $0.25 per share by February, 2007, plus a 3 year warrant
      for
      the purchase of 590,000 shares of common stock at an exercise price of $0.50
      per
      share.





The
      Company also issued the following promissory notes to in private placements
      to
      qualified buyers and accredited investors.





a)
      In
      January 2006, a convertible note financing arrangement in the amount of $50,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in January
      2007. The note plus accrued interest was repaid in April 2006.





b)
      In
      February 2006, a convertible note financing arrangement in the amount of
      $100,000, convertible at $0.25 per share, with interest at 10% per annum, due
      in
      February 2007. The note plus accrued interest was repaid in April
      2006.





Note
      Conversions to Common Stock: In May
      and June 2006, convertible note holders converted $910,931, consisting of
      $796,100 of principal, and $114,831 of accrued interest into 3,012,325 shares
      of
      common stock. $764,685 of principal and accrued interest conversion adjusted
      price of approximately $0.31503, and $146,246 of principal and accrued interest
      converted at $0.25.





In
      2004,
      the Company issued a series of convertible promissory notes payable with varying
      interest stated rates from 0% to 18% per annum. An 8% per annum interest rate
      was imputed for any notes having a stated interest rate below market interest
      rates. As of June 30, 2006 the holders of $250,000, of the notes had the right
      to convert, at the option of the holder and on or prior to the fifth day prior
      to the Mandatory Redemption Date (July 1, 2007), into such number of fully
      paid
      non-assessable shares by dividing the now split-adjusted Original Series A
      Issue
      Price ($0.3745) by the Conversion Price. The Conversion Price shall be the
      split-adjusted Original Series A Issue Price of $0.3745. However, if the Company
      issues additional stock (“Additional Stock”), after the date upon which any
      these notes were first issued, for a price less than the Conversion Price,
      the
      Conversion Price shall be as adjusted prior to each such issuance. This
      adjustment shall be the Conversion Price multiplied by a fraction where
      the:





15





•
            Numerator
                shall be the number of shares of Common Stock outstanding immediately
                prior to such issuance (subject to certain adjustments for warrants,
                options and convertible securities), plus the number of shares of
                Common
                Stock that the aggregate consideration received by the Company for
                the
                Additional Stock would purchase at the Conversion Price,
                and;


•
            Denominator
                shall be the number of shares of Common Stock outstanding immediately
                prior to such issuance (subject to certain adjustments for warrants,
                options and convertible securities), plus the number of shares of
                such
                Additional Stock.





For
      the
      six months ended June 30, 2006,the company recorded a charge of $108,803, of
      which $76,366 was related to the shares converted in the 6-month period ending
      June 30, 2006. Accrued interest on these notes at June 30, 2006 was
      $39,726.





As
      of
      June 30 ,
      2006,
      $2,278,500 of the convertible notes
      have rights where the holder of such notes may convert all or a portion of
      the
      unpaid principal plus unpaid accrued interest into shares of the Company’s
      common stock at $0.250 per share. The maturity dates of these notes were all
      due
      within 12 months of the note date. Accrued interest on these notes at June
      30,
      2006 is $75,269.





As
      of
      June 30 ,
      2006,
      $5,300 of the convertible notes
      have rights where the holder of such notes may convert all or a portion of
      the
      unpaid principal plus unpaid accrued interest into shares of the Company’s
      common stock at $0.3750 per share. The maturity dates of these notes were all
      due within 12 months of the note date. Accrued interest on these notes at June
      30, 2006 is $570.





Non-Convertible
      Notes Payable





At
      June
      30, 2006 the Company had notes payable to a commercial finance company in the
      amount of amount of $46,394, plus accrued interest of $6,917 plus three notes
      payable from investors that were not convertible notes with a principal balance
      of $105,000. The total accrued interest on these notes at June 30, 2006 was
      $31,386.





Loan
      Guarantee





In
      February 2006, the Company reached an agreement whereby two third-parties
      personally guaranteed a convertible note payable to an investor amounting to
      approximately $500,000 and bearing interest at 10% per annum. In exchange for
      the guaranty, the Company issued 1,000,000 shares of common stock and warrants
      to purchase 2 million shares of common stock at an exercise price of $0.25
      to
      these two parties. The fair value of the Company’s stock on February 22, 2006,
      the date the stock was issued, was $0.25 per share and the estimated fair value
      of the warrants was
      $77,766, calculated using
      the Black-Scholes model. The aggregate fair value of the stock and warrants
      issued for this guarantee amounted to $327,767 and has
      been capitalized as a loan guarantee. The fee is being amortized to interest
      expense as the related note payable is paid down. As of June 30, 2006 the
      unamortized Loan Guarantee amount was $54,628, and the Company recognized
      interest expense
      of $163,884 and $273,139 for the three and six months ending June 30, 2006
      related to the amortization of the guarantee fee.





**6.**  **Shareholders’
      Deficit**





The
      Company’s authorized capital stock consists of 200,000,000 shares of .001 par
      value stock, with 190,000,000 shares designated as common and 10,000,000 shares
      designated as preferred. On April 25, 2006, the board of directors of the legal
      acquirer (Sub-Urban Brands) approved a forward stock split on a 29-for-1 basis.
      On December 16, 2005, Sub-Urban’s board of directors, the Company’s wholly owned
      subsidiary, declared a two-for-one stock split of the common stock to be
      distributed in the form of a stock dividend on or about December 31, 2005,
      to
      holders of record as of December 16, 2005. In 2004 Sub-Urban’s board of
      directors declared a 2.67-for-one stock split of the common stock, to be
      distributed in the form of a stock dividend on or about August 16, 2004, to
      holders of record on August 16, 2004. Accordingly, all references to number
      of
      shares, except for shares authorized, and to per share information in the
      financial statements have been adjusted to reflect these stock splits on a
      retroactive basis.





**7.** **Preferred
      Stock**





The
      Company issued 2,167,910 shares of mandatorily redeemable Series A Convertible
      Preferred Stock in 2004. On May 10, 2006, the holders of the preferred stock
      agreed to convert the preferred stock of $812,552, plus accrued interest of
      90,894, into 2,859,863 shares of common stock at a conversion adjusted price
      of
      approximately $0.3159 per share.





16





**8.**  **Common
      Stock**





As
      of
      June 30, 2006 and December 31, 2005, the Company has, 49,185,687  and
      27,813,500 shares of common stock that are issued and outstanding, respectively.
      14,500,00 shares of common stock are unrestricted and free trading shares
      originally held by the shareholders of the legal acquirer, Sub-Urban Brands,
      Inc. Holders of shares of the Company’s common stock have the following
      rights:





•
            Dividend
                rights


•
            Liquidation
                rights





*Dividend
      rights* :
      After
      all of the Company’s Series A Preferred Stock has been redeemed or converted and
      subject to the prior rights of any other classes of stock at the time
      outstanding having prior rights to dividends, holders of Common Stock shall
      be
      entitled to receive, when, as and if declared by the Board of Directors, out
      of
      any the Company’s assets legally available therefore, such dividends as may be
      declared from time to time by the Board of Directors.





*Liquidation
      Rights* *:* Upon the
      distribution of the priority liquidation preferences of the Series A Preferred
      Stock shareholders, all of the Company’s remaining assets shall be distributed
      among the holders of Series A Preferred Stock and Common Stock pro rata based
      on
      the number of shares of Common Stock held by each, assuming conversion of
      one-half of all such Series A Preferred Stock. The Company’s Common Stock is not
      redeemable. Each issued and outstanding share shall have one vote.





Transactions
      for the six months ended June 30, 2006





In
      February 2006, the company issued 1,000,000 shares of its restricted common
      stock having a market value of $250,000 to two individuals as compensation
      for a
      third party’s guarantee of one of the Company’s financing
      arrangements.





On
      May
      10, 2006, the holders of the preferred stock agreed to convert the preferred
      stock of $812,552, plus accrued interest of 90,894, into 2,859,863 shares of
      common stock at a conversion adjusted price of approximately $0.3159 per share.





On
      May
      11, 2006, in connection with the merger of Sub-Urban Brands, Inc (legal
      acquirer) and Sub-Urban Industries, Inc. (accounting acquirer), the legal
      acquirer had 14,500,000 shares issued and outstanding, and issued exchanged
      31,673,363 of its common stock for the common stock of the accounting
      acquirer.





Note
      Conversions: In May and June 2006, convertible note holders converted $910,931,
      consisting of $796,100 of principal, and $114,831 of accrued interest into
      3,012,325 shares of common stock. $764,685 of principal and accrued interest
      conversion adjusted price of approximately $0.31503, and $146,246 of principal
      and accrued interest converted at $0.25.





**9.** **Warrants**





As
      of
      June 30, 2006 and December 31, 2005, the Company has 23,688,603 and 2,660,203,
      warrants to purchase shares of common stock respectively outstanding. Such
      issuances were accounted for under Financial Accounting Standards Board
      Statement No. 123 using the Black-Scholes option-pricing model (with the same
      assumptions as those used for the options, see Note 10).





There
      were no warrants exercised during the period ending June 30, 2006 and the year
      ended December 31, 2005.





Changes
      in the status of warrants, prior to any conversion price adjustments or warrant
      quantity adjustments are summarized below for the 6 month period ending June
      30,
      2006 and the year ended December 31, 2005:





**6
                Months ended June 30, 2006**
            
            **Year
                ended December 31, 2005****Warrants**
            
            **Weighted**
              **Average**
              **Price**
            
            **Warrants**
            
            **Weighted**
              **Average**
              **Price**Outstanding
                at beginning of period
            
            
            2,660,203
            
            $
            0.320
            
            
            943,643
            
            $
            0.355Granted
            
            
            21,028,400
            
            
            0.240
            
            
            1,716,560
            
            
            0.300Cancelled
                or expired
            
            
            —
            
            
            —
            
            
            —
            
            
            —Exercised
            
            
            —
            
            
            —
            
            
            —
            
            
            —Outstanding
                at end of period
            
            
            23,688,603
            
            $
            0.276
            
            
            2,660,203
            
            $
            0.320Exercisable
                at the end of the period
            
            
            23,688,603
            
            $
            0.276
            
            
            2,660,203
            
            $
            0.320Price
                range of warrants
            
            $
            0.10
                - 0.375
            
            $
            0.276
            
            $
            0.250
                - 0.375
            
            $
            0.320








17





Transactions
      for the 6 months ended June 30, 2006





In
      the
      6-month period ending June 30, 2006, the Company issued warrants convertible
      into 4,260,000 shares
      of its common stock to various consultants. The exercise price of the warrants
      ranged from $0.10 to
      $0.25 p er
      share.
      The Company recognized consulting expense of $349,956 related
      to these grants. The consulting expense was determined based on the
      Black-Scholes option value method. The warrants were granted in lieu of cash
      compensation for management consulting services rendered.





In
      the
      6-month period ending June 30, 2006, the Company issued warrants convertible
      into 15,768,400 shares
      of
      its common stock in connection with the acquisition of debt. The exercise price
      of these warrants ranged from $0.25 to $0.50 per
      share. The value of these warrants was $1,597,581 , and the
      Company recognized interest expense of $484,836 f or
      the
      amortized portion of these warrants. The value and expense was determined based
      on the Black-Scholes option value method.




In
        the
        6-month period ending June 30, 2006, the Company issued warrants convertible
        into 1,000,000 shares
        of
        its common stock in connection with a loan guarantee. The exercise price of
        these warrants was $0.25  per
        share. The value of these warrants was $77,767 , and the
        Company recognized loan guarantee expense of $64,806 f or
        the
        amortized portion of these warrants. The value and expense was determined
        based
        on the Black-Scholes option value method.







18




**10.**  **Stock-Based
      Compensation**





On
      June
      25, 2003 the Board of Directors of the Company adopted an equity incentive
      plan.
      At June 30, 2006, the plan has authorized a share pool 15,883,353 shares, of
      which a total of 10,638,587, were outstanding. There were no stock options
      exercised during the six-month period ending June 30, 2006 years and year ended
      December 31, 2005.





The
      Company accounts for its stock-based compensation based on SFAS No. 123,
“Accounting for Stock-Based Compensation”. Pursuant to SFAS No.123, the Company
      recognized an expense for the fair market value of the stock-based instrument
      granted to third parties and employees. SFAS No. 123, established and encouraged
      the use of the fair value based method of accounting for stock-based
      compensation arrangements under which compensation cost is determined using
      the
      fair value of stock-based compensation determined as of the date of grant and
      is
      recognized over the periods in which the related services are rendered. The
      Company uses the Black-Scholes Model to determine fair value for valuing options
      granted. The Black-Scholes method is based on the following assumptions for
      the
      period ending June 30, 2006: average risk free interest rate ranging from 4.68%
      to 5.24%; dividend yield of 0%; average volatility factor of the expected market
      price of the Company’s common stock of 50.28% and 43.85%; and an expected life
      of 6 years for the options.





For
      the
      period ending June 30, 2006, the company granted issued options convertible
      into
      3,005,889 shares of its common stock to officers and consultants to the Company.
      The exercise price of the options was from $0.25 per share to $0.64. The value
      of these grants was $504,385, and the Company recognized compensation expense
      of
      $115,696 for the vested portion of these grants.




The
      fair
      value of options granted under the plan were estimated at the date of grant
      using the Black-Scholes model with the following weighted average
      assumptions:




**Three
                months ended**
            
            **Six
                months ended****June
                30,**
            
            **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Expected
                term (in years)
            
            
            6.0
            
            
            6.0
            
            
            6.0
            
            
            6.0Risk-free
                interest rate
            
            
            5.12
              - 5.24
            %
            
            3.91
            %
            
            4.68
              - 5.24
            %
            
            3.91
            %Expected
                volatility
            
            
            43.85
            %
            
            52.6
            %
            
            43.85
              - 50.28
            %
            
            52.6
            %Expected
                dividend yield
            
            
            0
            %
            
            0
            %
            
            0
            %
            
            0
            %Weighted
                average fair value at grant date
            
            $
            0.17
            
            $
            0.14
            
            $
            0.17
            
            $
            0.14




The
      effect of recording share-based compensation expense for the three months and
      six months ended June 30, 2006 is as follows:




**Three
                  MonthsEnded****June
                  30,**
              **2006**
            
            **Six
                  MonthsEnded**
              **June
                  30,**
              **2006**Stock-based
                compensation expense related to employee stock options
            
            $
            206,701
            
            $
            341,489Tax
                benefit
            
            
            0
            
            
            0Net
                decrease in net earnings
            
            $
            206,701
            
            $
            341,489Effect
                on:Cash
                flows from operating activities
            
            
            —
            
            
            —Cash
                flows from financing activities
            
            
            —
            
            
            —Effect
                on:Net
                earnings per share — Basic
            
            $
            0.01
            
            $
            0.01Net
                earnings per share — Diluted
            
            $
            0.01
            
            $
            0.01




19




For
      the
      three and six months ended June 30, 2006, total share-based compensation expense
      recognized in earnings before taxes was $206,701 and $341,489, respectively
      and
      the total related recognized tax benefit was zero in both
      periods.




Changes
      in the status of options and warrants are summarized below for the period June
      30, 2006:




**Shares
                Available**
              **for
                Grant**
            
            **Number
                of**
              **Shares**
            
            **Weighted**
              **Average
                Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Term**
              **(in
                years)**
            
            **Aggregate**
              **Intrinsic
                Value**
              **(1)**Balance
                at December 31 , 2005
            
            
            367,302
            
            
            7,632,698
            
            
            0.259Granted
            
            
            (3,005,889
            )
            
            3,005,889
            
            
            0.335Authorized
            
            
            7,883,353
            
            
            —
            
            
            —Cancelled
                or expired
            
            
            —
            
            
            —
            
            
            —Exercised
            
            
            —
            
            
            —
            
            
            —Balance
                at June 30, 2006
            
            
            5,244,766
            
            
            10,638,587
            
            
            0.288
            
            
            9.2
            
            $
            3,823,429Exercisable at
                June 30, 2006
            
            
            
            
            
            4,619,754
            
            
            
            
            
            
            
            $
            1,732,295




(1)
      The
      aggregate intrinsic value represents the total pre-tax intrinsic value, based
      on
      the Company’s closing stock price of $0.64 as of June 30, 2006, which would have
      been received by the option holders had all option holders exercised their
      options as of that date.




The
      total
      pre-tax intrinsic value of options exercised was zero during the three and
      six
      months ended June 30, 2006, respectively.




Total
      options under the Plan at June 30, 2006, comprised the following:





**Option**
              **Exercise**
              **Price**
            
            **Number****Outstanding**
              **as
                of**
              **June
                30,****2006**
            
            **Weighted****Average**
              **Remaining**
              **Contractual
                Life (Years)**
            
            **Number**
              **Exercisable**
              **as
                of**
              **June
                30, 2006**$0.64
            
            
            656,950
            
            
            10.0
            
            
            00.38
            
            
            400,500
            
            
            8.2
            
            
            400,5000.28
            
            
            632,198
            
            
            7.2
            
            
            632,1980.25
            
            
            8,948,939
            
            
            9.3
            
            
            3,587,056Total
            
            
            10,638,587
            
            
            
            
            
            4,619,754




20




As
      of
      June 30, 2006, there was $545,799 of total unrecognized compensation cost
      related to non-vested share-based compensation arrangements granted. This
      unrecognized compensation expense is expected to be recognized over a
      weighted-average period of 1.5 years.





At
      June
      30, 2006 the Company has 6,018,833 options and warrants which are not
      vested, with total outstanding options and warrants at June 30, 2006 of
      34,327,190.




**11.**  **Commitments**




The
      Company had leased approximately 2,800 square feet of combined office and
      warehouse space in leased premises located at 500 Molino, Los Angeles,
      California, at a monthly rental rate of $2,300. The lease commenced March 24,
      2003 and expired March 31, 2004. The Company continued in the premises on a
      month-to-month basis through July 15, 2004 at the same monthly base rent. The
      Company, with the landlord’s permission, terminated the lease effective July 15,
      2004.  In July of 2004, the Company entered into a lease for approximately
      4,000 square feet of combined office and warehouse space located at 2222 E.
      Washington, Los Angeles, California, at a monthly rental rate of $2,500. The
      lease commenced July 15, 2004 and expired July 15, 2006. The Company conducts
      all of its executive and administrative functions in this facility. Additional
      warehousing and distribution functions are contracted for by the Company on
      a
      monthly basis, and paid for on a per-box, per-piece, per-order unit
      cost.




21





Future
      minimum lease payments under non-cancelable operating leases for the period
      ending June 30, 2006, were as follows:





2006
            
            $
            1,300Thereafter
            
            
            —Total
            
            $
            1,300





Rent
      expense under operating leases for the six-month period ended June 30, 2006
      is
      $15,615.




**12.**  **Concentrations
      of Certain Risks**





Concentration
      of Credit Risk





The
      Company’s financial instruments that are exposed to concentrations of credit
      risk consist primarily of cash and accounts receivable. The Company maintains
      its cash in bank deposit accounts, that at times may exceed federally insured
      limits. The Company has not experienced any losses in such
      accounts.





The
      Company extends credit to customers located throughout North America whose
      sales
      invoices are not subject to the secured line of credit accounts receivable
      program based upon an evaluation of the customer’s financial condition and
      credit history. The Company’s customers located outside of North America pay on
      a cash-in-advance basis.





The
      Company performs ongoing credit evaluations of its customer’s financial
      condition, and limits the amount of credit extended when deemed necessary,
      but
      generally does not require collateral. At June 30, 2006 seven of the Company’s
      customers accounted for 100% of the Company’s accounts receivable, each with 1%
      to 41% of the Company’s accounts receivable. One other customer accounted for 7%
      of the Company’s net sales for the year ended June 30, 2006. As of June 30, 2005
      five of the Company’s customers accounted for 55%, each accounting for 8% to 15%
      of the Company’s accounts receivable.




**13.**  **Subsequent
      Events**





Issuance
      of Convertible Debentures and Warrants





During
      the period July 1, 2006 through August 9, 2006, the Company entered into
      transactions with various accredited investors pursuant to which the Company
      borrowed an aggregate of $550,000 from these accredited investors as evidenced
      by one year convertible debentures, subject to repayment at the earlier of
      one
      year or the Company’s consummation of a financing of not less than $4,000,000.
      The convertible debentures bear interest at the rate of 10% per annum. The
      Convertible Note holders are entitled to convert all or a portion of the
      outstanding principal amount and accrued interest on the debentures into shares
      of the Company’s common stock at a conversion price of $0.25 per share, subject
      to certain anti-dilution provisions. The note and the related warrant contain
      registration rights requiring the Company use its best efforts to file a
      registration statement with regards to the registrable securities by November
      15, 2006. In connection with these financing transactions, the Company also
      issued 3 year warrants to purchase 2,200,000 shares of the Company’s common
      stock at an exercise price of $0.25 per share. Fees for this financing included
      a cash fee of $55,000 and the issuance of 3 year warrants to purchase 220,000
      shares of the Company’s common stock at an exercise price of $0.25 per share,
      plus legal and administrative fees related to this financing of approximately
      $4,530. The Company used the cash proceeds for working capital
      needs.





The
      holders of the Notes and Warrants have registration rights that require the
      Company to file a registration statement with the Securities and Exchange
      Commission to register the resale of the common stock issuable upon conversion
      of the Convertible Notes or the exercise of the Warrants. Under EITF No. 00-19, *Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company's Own Stock* ,
      the
      ability to register stock is deemed to be outside of the Company's control.
      Accordingly, the initial fair value of the Warrants and the initial fair value
      of the embedded derivatives (i.e., conversion feature) will be recorded as
      an
      accrued warrant liability and conversion feature liability in the consolidated
      balance sheet, and will be marked to market at the end of each reporting
      period.





Operating
      Lease





The
      Company is moving its operations and entered into a lease for approximately
      10,600 square feet of combined office and warehouse space in leased premises
      located at 8723 Bellanca Avenue, Los Angeles, California,
      at a monthly base rental rate of $8,931 to $9,569 over the term of the lease.
      The lease commences August 21, 2006 and expires October 31, 2009. The Company’s
      current lease expired on July 15, 2006. The Company will conduct all of its
      executive, administrative and operational functions in this facility .




22




Future
      minimum lease payments under this operating lease are as follows:





2006
            
            $
            25,4962007
            
            
            103,9812008
            
            
            112,2742009
            
            
            95,688Total
            
            $
            337,439




23




**** **ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
      OPERATION.**





Safe
      Harbor Statement





We
      desire
      to take advantage of the "safe harbor" provisions of the Private Securities
      Litigation Reform Act of 1995. This Report on Form 10-QSB contains a number
      of
      forward-looking statements that reflect management's current views and
      expectations with respect to our business, strategies, products, future results
      and events and financial performance. All statements made in this Report other
      than statements of historical fact, including statements that address operating
      performance, events or developments that management expects or anticipates
      will
      or may occur in the future, including statements related to distributor
      channels, volume growth, revenues, profitability, new products, adequacy of
      funds from operations, statements expressing general optimism about future
      operating results and non-historical information, are forward-looking
      statements. In particular, the words "believe," "expect," "intend," "
      anticipate," "estimate," "may," "will," variations of such words, and similar
      expressions, identify forward-looking statements, but are not the exclusive
      means of identifying such statements, and their absence does not mean that
      the
      statement is not forward-looking. These forward-looking statements are subject
      to certain risks and uncertainties, including those discussed below. Our actual
      results, performance or achievements could differ materially from historical
      results as well as those expressed in, anticipated or implied by these
      forward-looking statements. We do not undertake any obligation to revise these
      forward-looking statements to reflect any future events or circumstances.





Readers
      should not place undue reliance on these forward-looking statements, which
      are
      based on management's current expectations and projections about future events,
      are not guarantees of future performance, are subject to risks, uncertainties
      and assumptions (including those described below) and apply only as of the
      date
      of this Report. Our actual results, performance or achievements could differ
      materially from the results expressed in, or implied by, these forward-looking
      statements. We undertake no obligation to publicly update or revise any
      forward-looking statements, whether as a result of new information, future
      events or otherwise.





The
      following discussion should be read in conjunction with our consolidated
      financial statements and the related notes that appear elsewhere in this report.
      Our actual results could differ materially from those discussed in these forward
      looking statements. Factors that could cause or contribute to such differences
      include, but are not limited to, those discussed below and elsewhere in this
      report, particularly in the section entitled “Risk Factors” of this
      report.





As
      used
      in this report, the terms “we”, “us”, “our”, and “Sub-Urban Brands” mean
      Sub-Urban Brands, Inc. and our subsidiary Sub-Urban Industries,
      Inc.





THE
      FOLLOWING DISCUSSION AND ANALYSIS PROVIDES INFORMATION THAT OUR MANAGEMENT
      BELIEVES IS RELEVANT TO AN ASSESSMENT AND UNDERSTANDING OF OUR RESULTS OF
      OPERATIONS AND FINANCIAL CONDITION. THIS DISCUSSION SHOULD BE READ TOGETHER
      WITH
      OUR FINANCIAL STATEMENTS AND THE NOTES TO FINANCIAL STATEMENTS WHICH ARE
      INCLUDED IN THIS REPORT, AND WITH OUR COMPANY’S CURRENT REPORT ON FORM 8-K FILED
      ON MAY 15, 2006 AND ALL SUBSEQUENT FILINGS.





**Overview**





On
      May
      11, 2006, pursuant to an Agreement Concerning the Exchange of Securities by
      and
      between Sub-Urban Brands, Inc., (formerly known as DP&D, Inc.), a Nevada
      corporation (“the Company”), Sub-Urban Industries, Inc., a California
      corporation (“Sub-Urban”), and the security holders of Sub-Urban (the “Sub-Urban
      Security Holders”), the Company acquired all of the outstanding securities of
      Sub-Urban from the Sub-Urban Security Holders in exchange for newly issued
      unregistered securities of the Company. As a result of the share
      exchange (“Merger”), the Company, which previously had no material operations,
      acquired the business of Sub-Urban. The acquisition has been accounted for
      as a
      reverse merger (recapitalization) with SUI deemed to be the accounting
      acquirer.





Pursuant
      to the Agreement, (i) 31,673,363 shares of the Company’s Common Stock were
      issued in exchange for all 31,673,363 shares of Sub-Urban’s Common Stock, (ii)
      $2,734,900 face amount of the Company’s convertible promissory notes convertible
      into the Common Stock of the Company at a range of prices from $0.250 per share
      to $0.375 per share, and subject to respective conversion price adjustments,
      were exchanged for a like face amount of promissory notes held by the Sub-Urban
      Security Holders (iii) 16,822,245 Common Stock purchase warrants of the Company
      convertible at prices ranging from $0.140 to $0.375 per share, were exchanged
      on
      a one-for-one basis and are exercisable at the same price and terms per share
      as
      the warrants of Sub-Urban, and (iv) 7,732,698 stock options of the Company
      exercisable at prices ranging from $0.250 to $0.375 per share were exchanged
      on
      a one-for-one basis and are exercisable at the same price and terms per share
      as
      the stock options of Sub-Urban.





The
      Merger resulted in a change of control of the Company, with the former
      stockholders of the Company owning approximately 31.4% of the Company’s
      outstanding Common Stock, or approximately 17.8% assuming the conversion of
      all
      of the company’s outstanding convertible notes, options and warrants.
      Shareholders of Sub-Urban now own 68.6% of the Company’s outstanding common
      stock.





24




The
      Agreement was determined through negotiations between the Company and Sub-Urban.
      Prior to the Merger, two entities affiliated with a principal shareholder of
      the
      Company made short term loans totaling $150,000 plus interest at 10% to
      Sub-Urban which were repaid by Sub-Urban in April 2006. Other than these two
      short term loans, there were no material relationships between the Company
      and
      Sub-Urban, any of their respective affiliates, directors or officers or any
      associates of such directors or officers.





On
      August
      21, 2006, we moved our corporate offices and entered into a 38 month lease
      for
      10,632 square feet located at 8723 Bellanca Ave, Bldg. A., Los Angeles, CA
      90045.





**Critical
      Accounting Policies and Estimates**





Our
      discussion and analysis of financial condition and results of operations is
      based upon our financial statements, which have been prepared in accordance
      with
      accounting principles generally accepted in the United States of America. The
      preparation of these financial statements requires us to make estimates and
      judgments that affect the reported amounts of assets, liabilities, revenue
      and
      expenses, and related disclosure of contingent assets and liabilities. On an
      ongoing basis, we evaluate our estimates. We base our estimates on historical
      experience and on various other assumptions that we believe to be reasonable
      under the circumstances. These estimates and assumptions provide a basis for
      making judgments about the carrying values of assets and liabilities that are
      not readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions, and these differences
      may
      be material.





We
      believe the following critical accounting policies affect its more significant
      judgments and estimates used in the preparation of its consolidated financial
      statements.





**Convertible
      Debt Financing and Derivative Liabilities**





In
      accordance with Statement of Financial Accounting Standards No. 133, "Accounting
      for Derivative Instruments and Hedging Activities," as amended ("SFAS 133"),
      EITF 00-19, 00-27, 05-02, 05-04 and 05-08. the company has reviewed the terms
      of
      its convertible debt financing and the holder's conversion right provision
      (collectively, the features) contained in the terms governing the Debentures
      are
      not clearly and closely related to the characteristics of the Debentures.
      Accordingly, the features qualified as embedded derivative instruments at
      issuance and the warrants were free-standing derivative instruments These
      derivative features do not qualify for any scope exception within SFAS 133,
      they
      were required by SFAS 133 to be accounted for separately from the debt
      instrument and recorded as derivative financial instruments. (See Convertible
      Debt Notes to Financial Statements for more information)




For
      the
      six months ended June 30, 2006, we recorded an aggregate non-cash interest
      expense items of $916,627 including $244,237 related to the debt
      features on the $2,533,800 of our convertible notes; $334,172 related to
      warrants; $337,763 related to the value of the derivative liability related
      to
      the embededed debt features of the convertible notes. We recorded $675,769
      in warrant liabilities for warrants with mandatory registration
      rights.




**Cash
      Requirements and Additional Funding.** We will
      require additional financing, either from loans, or the issuance of debt and
      equity securities. We are unlikely to obtain material commercial bank financing.
      If we cannot obtain sufficient additional financing, we may be forced to slow
      down or suspend our operations. The success of our business will be dependent
      on
      a number of factors, many of which are beyond our control (see "Risk Factors,"
      below). Accordingly, we can give no assurance that the division will become
      profitable. Further, we can give no assurance that we will be able to obtain
      sufficient financing to implement our business plan or that, if financing is
      obtained, such financing will not materially dilute our existing shareholders.
      Our ability to obtain additional financing in the coming months will depend
      upon
      a number of factors, including market conditions, our results of operations,
      our
      success in implementing our business plan for brand launches, our acquisition
      strategy and investors' perception of our business and prospects.





**Assets.** Our
      current assets total $475,343, consisting primarily of cash of $155,333,
      inventory net or reserves of $166,134 and prepaids and advances of $81,569,
      and
      $54,628 representing the unamortized capitalized amount of a loan guarantee
      by a
      third-party for a convertible note payable issued by the Company.





**Liabilities
      and Working Capital.** Our
      liabilities of $3,395,907 are all current and consist primarily of accounts
      payable of $397,162, accrued salary and benefits of $184,719, warrant
      liabilities of $675,770, secured convertible notes payable in the principal
      amount of $750,000, convertible notes payable in the principal amount of
      $1,783,800, and non-convertible notes payable in the principal amount of
      $151,393. The convertible notes have a conversion price adjustment liability
      of
      $50,450, and a conversion feature liability of $395,750, and have been
      discounted for warrant issuances of $657,910, and discounted for beneficial
      conversion liabilities of $518,716.




25




**Results
      of Operations**





Six
      Months Ended June 30, 2006 Compared to June 30, 2005





In
      the
      second quarter of 2005, the Company was in the process of implementing strategic
      initiatives i) to redesign the WHITEBOY â brand
      image to become more retail friendly and ii) to complete makeover and
      recruitment of the management, accounting, service, design and production staff
      in order to effect a merger with a public company and significantly improve
      the
      product offering.





In
      June
      of 2005, the Company retained a new President, Meredith Feldman, and in October
      2005, retained a consultant, Jack Mott who became our Chief Financial Officer
      and Chief Operating Officer, on May 11, 2006. The company also worked to change
      the image of its brand WHITEBOY â for men.
      The brand’s popularity continued to grow in the celebrity community, but
      distribution efforts were limited by the heavily branded product. The company
      redesigned its website to focus more on the “Rooster” character and less on the
      word Whiteboy. Management believed that the product needed to reflect this
      same
      look to stay consistent with the market. The company utilized the brand
      consulting services of Caro Marketing and engaged Brad Riedell of New York
      based
      apparel firm Zoo York® to redesign its product offering. CaroMarketing has since
      acted as the Company’s public relations and brand consultant to this day and
      Brad Riedell is currently men’s design director for our Mash Culture LabTM
brand.





In
      the
      third fiscal quarter of 2005, we pulled our current products from our
      distribution channels. As a result of the efforts, the Company focused on
      rebuilding the infrastructure of the Company and redesigning current brands
      and
      developing new brands for launch in the third fiscal quarter of 2006. On May
      11,
      2006 Sub-Urban Industries, Inc., a California corporation, effected a reverse
      merger with Sub-Urban Brands, Inc., a Nevada corporation.





We
      recorded sales $25,037, for the period ending June 30, 2006, compared to
      $103,967, a decrease of 74%, for the period ending June 30, 2005, reflecting
      the
      reduced focus on current sales and investment in development of future products.
      The impact of this revenue decrease was partially mitigated by an improvement
      in
      our gross margin resulting in a 46% decrease in gross profit of $10, 793. Our
      operating expenses for the period ending June 30, 2006 were $2,054,649, compared
      to $789,152, an increase of 160%, for the period ending June 30, 2005. This
      change was due primarily to the 160% increase in sales and marketing
      expenditures of $239,494 for advertising and compensation for a national sales
      director to develop a mass market channel and for the fiscal third quarter
      2006
      launch of our new products, a72% increase in product development costs of
      $48,463, a 153% increase in general and administrative payroll related costs
      primarily for the addition of company officers of $197,364, a 141% increase
      in
      costs for professional fees of $161,556 primarily related to the merger of
      May
      11, 2006 and on-going financings, and an increase of $220,789 for the costs
      of
      non-cash compensation related to vesting stock options accounting under
      SFAS123R. Investor relations costs increased $404,556, including $315,827 for
      non-cash compensation, ($0 in the period ending June 30, 2005) during the
      six-month period ending June 30, 2006 in which the Company completed its
      reverse-merger.





The
      net
      of other expenses for the period ending June 30, 2006 were $1,189,632, compared
      to $262,750, an increase of 353% from the period ending June 30, 2005. This
      change is primarily due to a increase of $906,886 ($9,741 in the six months
      ending June 30, 2005), in non-cash interest expense from equity instruments
      issued in connection with convertible notes, a non-cash loan guarantee expense
      of $273,139, an increase of $233,489 for the beneficial conversion features
      of
      equity instruments, and a decrease of $541,700 in preferred stock redemption
      accretion due to the conversion of preferred stock to common stock prior to
      the
      Merger of May 11, 2006.





The
      Company’s net loss was $3,231,847 compared to $1,028,675 for the six-month
      period ending June 30, 2006 and 2005, respectively.





Three
      Months Ended June 30, 2006 Compared to June 30, 2005





In
      the
      three months ended June 30, 2006, compared to the three month period ending
      June
      30, 2005, we were subject to the corporate re-direction described in the
      business comparison of the six month period comparison in the paragraphs above.
      We recorded sales $16,358 for the 3 month period ending June 30, 2006, compared
      to $81,883, a decrease of 80%) for the 3 month period ending June 30, 2005,
      reflecting the reduced focus on current sales and our investment in the
      development of our future products. The impact of this revenue decrease was
      partially mitigated by an improvement in our gross margin resulting in a 46%
      decrease in gross profit of $6,232. Our operating expenses for the 3-month
      period ending June 30, 2006 were $1,424,523, compared to $485,744, a 193%
      increase for the 3 month period ending June 30, 2005. This change was due
      primarily to the 208% increase in sales and marketing expenditures of $155,536
      for advertising and compensation for a national sales director to develop a
      mass
      market channel and for the fiscal third quarter 2006 launch of our new products,
      a 190% increase in general and administrative payroll related costs primarily
      for the addition of company officers of $126,595, a 106% increase in
      professional fees of $100,410 primarily related to the merger of May 11, 2006
      and on-going financings, increases in investor relations of $404,556, and a
      71%
      increase of $85,960 for the costs of non-cash compensation related to vesting
      stock options accounted for under SFAS123R.





The
      net
      of other expenses for the 3 month period ending June 30, 2006 were $834,596
      compared to $132,619, an increase of 529%, for the 3 month period ending June
      30, 2005. This change is primarily due to an increase of $806,086 in non-cash
      interest expense from equity instruments issued in connection with convertible
      notes, a non-cash loan guarantee expense of $163,884, an increase of $242,061
      for the beneficial conversion features of equity instruments, and a decrease
      of
      $541,700 in preferred stock redemption accretion due to the conversion of
      preferred stock to common stock prior to the Merger of May 11,
      2006.





The
      Company’s net loss was $2,251,733 compared to $604,745 for the three-month
      period ending June 30, 2006 and 2005 respectively.





26




**Liquidity
      and Capital Resources**





At
      June
      30, 2006 we had a working capital deficit of $2,420,065. Our total assets at
      June 30, 2006 were $751,692, of which $155,333 was cash. At June 30, 2006 our
      total liabilities were $3,395,907. Our Company has invested in the redesign
      and
      launch of its new brands, and we do not anticipate material revenues from these
      products prior to the fourth quarter of fiscal 2006.





**Our
      Plan for Operations for in 2006**





The
      first
      six months of 2006 consisted of the Company repositioning its initial brand
      offering WHITEBOY® for men. The Company was able to successfully release
      WHITEBOY® for men as a high-end specialty brand with distribution to image-based
      retailers. The brand was selected by the internationally recognized Fred Segal
      of Santa Monica, CA for delivery in the 3 rd quarter
      of 2006. The repositioning of the WHITEBOY® for men brand allowed the Company to
      continue developing its multi-brand revenue model. The Company spent the first
      6
      months of 2006 developing two more brands using the “Rooster” logo created by
      WHITEBOY Ò for men.
      The development of MASH CULTURE LAB Ô and
      WHITEBOY® for girls began in February of 2006 culminating with their wholesale
      launch at the New York Pool Trade Show in July of 2006. These two brands, unlike
      WHITEBOY Ò for men,
      are seeking larger distribution paths through specialty retail chains and
      department stores.





The
      Company also focused on attracting industry-leading talent to design and produce
      our core offerings. The Company hired Ashley Scranton as design director for
      WHITEBOY® for girls with her focus on developing an appealing mass distributed
      brand. The company also hired Melanie Garman as director of production for
      all
      brands owned and distributed by Sub-Urban Brands, Inc. Ms. Garman immediately
      moved nearly all sourcing and production overseas to decrease the Company’s
      costs of production.





In
      continuing to develop WHITEBOY Ò for men
      as a high-end exclusive specialty brand, the Company initiated its practice
      of
      partnering with widely known and respected artists to design its collection.
      The
      Company entered into a seasonal agreement with well-known punk rock fashion
      icon
      Heidi Minx of Franky and Minx Ò .
      Ms Minx
      will develop the majority of the Fall 2006 offering of WHITEBOY Ò for
      men.





The
      Company also completed staffing its regional based sales force by adding
      representatives to the West Coast, the Southwest, the Southeast and the Midwest
      to compliment our east coast showroom. The Company negotiated commission based
      agreements, paying 10% for sales made within their respective territories for
      the distribution of our brands. These sales agreements are cancelable by the
      Company with 30 days written notice.





We
      also
      used the first 6 months of operation in 2006 to continue our goal of becoming
      a
      publicly Company trading in the Over-The- Counter bulletin board market. The
      Company realized this goal on May 11, 2006 when we completed a successful merger
      with DP&D, Inc, a Nevada corporation.





The
      Company will continue to sell its three brands in the wholesale environment
      as
      well as continue its retail operations online. The Company has plans to attend
      several wholesale tradeshows in the third and fourth quarters of fiscal of
      2006,
      whose revenues are anticipated commencing in the fourth quarter of 2006 and
      the
      first quarter of 2007. These tradeshows are industry known and are located
      in
      New York City, Las Vegas, Los Angeles, Atlanta, Chicago, Miami and Dallas.
      In
      addition, the Company has instituted an internal sales campaign utilizing two
      sales representatives contacting over 3,000 retail stores by phone and mail
      seeking orders for the Company’s brands. These sales activities will occur from
      July 2006 through December 2006 as part of our wholesale launch.





The
      Company will be seeking international distributors who represent premium
      lifestyle and street brands in their respective countries. We will focus on
      agreements for distribution in Japan, Australia, Europe and Canada. The Company
      has also begun seeking high margin recurring revenues streams through licensing
      of additional branded products. The Company will actively seek distribution
      arrangements for one or all of its brands in footwear, belts, bags, headwear
      and
      other apparel and accessory related products.





The
      Company is also actively pursuing emerging and or established apparel companies
      for acquisition to complement WHITEBOY Ò for men,
      WHITEBOY Ò for
      girls and MASH CULTURE LAB Ô .
      Subject
      to successful financing activities, the Company intends to make one or more
      acquisitions by 12/31/2006 that is consistent with our multi brand approach
      to
      generating revenue in addition to our current offerings in apparel.





The
      Company will continue its aggressive multi media image based marketing campaign
      known as “Get Cocky” for the next 6 months. This campaign will consist
      of street marketing in 8 major metropolitan markets, advertising in trade
      and fashion magazines, product placement in fashion magazines, celebrity gifting
      and co-branded marketing initiatives with Fortune 500 media organizations.
      The
      Company will continue developing media and entertainment industry relationships
      with EMI Capital Group and Emmis Communications, Inc.





We
      will
      continue in our efforts to produce better made garments at a lower cost through
      our overseas vendors for our mass distributed brands WHITEBOY Ò for
      girls and MASH CULTURE LAB Ô .
      The
      Company will focus on its knit based products being produced in India, while
      denim and woven products will be produced in China for WHITEBOY Ò for
      girls and MASH CULTURE LAB Ô .
      WHITEBOY Ò for men
      will primarily be manufactured in Los Angeles due to its highly customized
      offering and the need to turn new product every 6-10 weeks. Our production
      arrangements are contracted for by purchase orders at an arms-length negotiated
      price and delivery date.





27




The
      distribution of WHITEBOY Ò for
      girls and MASH CULTURE LAB Ô to our
      retail partners will continue to be outsourced, currently by Jam Industries,
      Inc
      of Gardena, CA. The fulfillment of WHITEBOY Ò for men
      and all our web based orders will be handled through our office and distribution
      center. The Company anticipates implementation of its Electronic Data Interface
      (EDI) by the end 4 th quarter
      2006 allowing it to do business with the larger retail specialty chains and
      department stores.





In
      order
      to complete our business strategy of developing a multi brand offering, the
      Company will need to raise $8,000,000 in financing in the third and fourth
      quarters of 2006. These proceeds will be used to continue to develop our three
      current brands, finance production, execute strategic acquisitions and for
      the
      general operating costs of the Company. Further, we can give no assurance that
      we will be able to obtain sufficient financing to implement our business plan
      or
      that, if financing is obtained, such financing will not materially dilute our
      existing shareholders. Our ability to obtain additional financing in the coming
      months will depend upon a number of factors, including market conditions, our
      results of operations, our success in implementing our business plan for brand
      launches, our acquisition strategy and investors' perception of our business
      and
      prospects.





**Our
      Business**





SUI
      was
      founded in March of 2003 as a company for lifestyle apparel brands. Our goal
      is
      to become a leading designer and marketer of leading edge, name brand apparel
      and accessories, marketed primarily to 13 to 29 year old men and women. Our
      first apparel brand, WHITEBOY®, was released to the retail market in September
      of 2003. We believe that WHITEBOY® is an exciting brand that will make a major
      impression on the specialty retail marketplace.





Initially,
      we limited the production of WHITEBOY® apparel in order to evaluate the brand’s
      viability. We focused initial production on knit tops (t-shirts, tank tops)
      and
      various forms of headwear. These early designs were placed on pre-fabricated
      garments with simple printing techniques. As the brand became more widely
      accepted, we expanded our product portfolio and moved to developing more
      sophisticated cut and sew garments. The following are a list of current
      WHITEBOY® products offered with varying printing techniques, washes,
      embroideries and appliqués:





MEN


·  Fashion
        Work shirts —
 ·  Custom
        T-Shirts with 20-24 varying graphic designs per season
 ·  Premium
        Fleece
 ·  Dress
        Shirts
 ·  Twill
        and
        Denim Jackets





In
      recent
      months, the Company secured a major internationally recognized image based
      retailer to carry the WHITEBOY® brand for men. Fred Segal of Santa Monica placed
      an order for the fall of 2006 and has helped establish WHITEBOY® for men as an
      exclusive specialty brand. The brand WHITEBOY® for men will be sold exclusively
      at high-end specialty shops that are key influencers for larger retail chains.
      The Company will partner with known celebrity artists/designers to continue
      to
      drive media attention to the brand. The Fall 2006 season is being co-designed
      by
      punk fashion designer Heidi Minx of Franky and Minx and Los Angeles based street
      artist Soul Session. Heidi and Soul’s punk/street based collection will retail
      from $60 up to $450 per garment. This recent development has given the Company
      an opportunity to create another brand out of WHITEBOY® for men that uses the
      rooster, our iconic figure, and it will allow us to target a much larger retail
      opportunity. The new brand is called MASH CULTURE LABTM (MCLTM).





MASH
      CULTURE LABTM is targeted for specialty chain and department store distribution.
      MCLTM is to have a much larger distribution than WHITEBOY® for men in that the
      garments have been designed for a broad appeal. We have spent considerable
      time
      ensuring that the quality of the garment meets or exceeds that of our
      competition. In addition, we believe our graphics are a distinguishing feature
      for MCLTM. We use theme-based concepts and hand-drawn art to achieve fresh
      designs. We believe that our leading-edge graphics along with premium-quality
      garments will allow us to develop MCLTM into a widely distributed distinctive
      brand. We further believe that theme-based collections with a single point
      of
      view gives the retailer the ability to buy deeper into the line with the
      assurance of merchandising the product in stores.




The
      Company’s products are sold primarily at wholesale prices, determined by our
      customers’ tolerance, distribution patterns, and production costs. We seek to
      realize gross margins ranging from 40% to 82% depending on the product and
      distribution point.




We
      have
      also developed a signature print known as the “COCK CAMO” using our rooster logo
      design. This signature print features a prancing rooster on a camouflage print
      fabric, which we believe clearly distinguishes us from our competitors. While
      not a specific garment type, the “COCK CAMO” is becoming an integral part of the
      MCLTM brand. This distinctive print can be found in pocket linings, trims,
      waistbands, and as an all over print on various garments. In addition, this
      print is the focus of our marketing materials, website and future media
      campaigns. We anticipate that we will use this unique print on multiple garments
      in various applications, including:





28




MEN


·  Fashion
        Work shirts —
 ·  Custom
        T-Shirts with 20-24 varying graphic designs per season
 ·  Premium
        Fleece
 ·  Core
        Fleece
 ·  Dress
        Shirts
 ·  Cargo
        Pants and Shorts
 ·  Twill
        Jackets
 ·  Mesh
        Track Suits
 ·  Polos
 ·  Belts
        and
        Buckles
 ·  Custom
        Headwear


The
      most
      recent brand to be introduced to the market is our young “contemporary”
collection known as WHITEBOY® for girls. WHITEBOY® for girls is a fashion
      contemporary collection that appeals to those with a free spirited irreverent
      attitude towards fashion making them confident in their decisions. Influenced
      by
      popular culture, the designs integrate converging genres in fashion, music
      and
      entertainment.





Women


*Core
        Tees


*
      Fashion
      Tees


*
      Track
      Jackets


*
      Hoodies


*
      Pants


*
      Tanks


*
      Skirts


*
      Dresses


*
      Cargo
      Pants


*
      Shorts


*
      Hats


*
      Bags


*
      Belts





***Target
      Market.***





MCLTM,
      is
      marketed to individuals between the ages of 13 and 29 who enjoy the “urban” or
      the “board” (surf/skate) lifestyles, but are not hard-core in either. We believe
      that while our core customer is fond of the “urban” and “board” lifestyles,
      neither fully represents that customer’s identity. We believe that there is a
      growing marketplace where rock, rap, electronic music and sports are merging;
      this is the melting pot MASH CULTURE LABTM represents, which we term the
“Suburban” market and which is sometimes referred to as “Mash” or “Mash
      Culture”. We believe that the “Suburban/Mash” target market dwarfs both the
“urban” and “board” markets, although it is heavily influenced by both, as well
      as by many other factors. We have been a leader in identifying this “Mash
      Culture” and have incorporated it into our designs, marketing and management
      programs as well as identified it as our brand name. We believe that the racial,
      cultural and economic diversity of the large cities will greatly expand in
      the
      next few years. “Mash Culture”, which borrows the best of existing trends and
      ideas, will be the source of creative dynamism, because it addresses our target
      market’s desire to be interesting and unpredictable. Fueled by technology, it is
      already changing fashion, design and music. The use of inexpensive mega-pixel
      cameras, easy to use music software and the democratization of media via the
      Internet has consumers inspired to create and personalize. “Mash Culture” is
      primarily, but not entirely, an evolution of what was traditionally known as
      the
“Urban” market. “Urban” clothing and music were once a very defiant and bold
      look in the early 1990’s. This was evidenced by oversized t-shirts, professional
      sports jerseys, baggy jeans and high profile jewelry. Today you will still
      see
      some of the looks of early “Urban” clothing mixed with more traditional looks
      such as dress shirts, polos, and sweaters and even tailored clothing. On the
      music side, you will find that the DJ culture introduced the “Mash” music scene
      by mixing the sounds of hip hop/rap with more contemporary sounds that included
      classical, dance, pop or even country music.





We
      believe this “Mash” market is comprised of approximately 24 million, 13 to 29
      year olds who connect with hip hop music, affiliate with the hip hop culture,
      and pack a robust purchasing power of $500 billion annually according to a
      published report called “The US Urban Youth Market: Tapping the Power of the
      Trend setting Hip Hop Culture and Lifestyle.” According to Packaged Facts, a
      division of MarketResearch.com, hip hop consumers living outside the 100 largest
      metropolitan areas in relatively small cities, towns and rural areas generally
      reflect the same attitudes and values expressed by their large
      metropolitan-dwelling counterparts, responding equally to the power of hip-hop
      cultural trends. Our belief is that urban is not a geographic place, but rather
      a state of mind.





This
      “Mash Market” is about setting trends, with strong affiliations to clothing,
      hand held devices, Internet technology, drinks, snacks and personal care items.
      According to Packaged Facts, this hip-hop cultural experience easily crosses
      racial lines and is significantly preferred by females, more than males. This
      hip-hop cultural experience has most of its influence with 15-17 year
      olds.





29




***Marketing
      Strategy*** .





We
      intend
      to support the MASH CULTURE LABTM brand with a well-researched marketing
      strategy. We have spent the better part of two years studying the reaction
      by
      potential consumers to our “ROOSTER” logo and believe that the brand must be
      supported by an image-based multi-faceted marketing campaign. We believe that
      trend setting actors, musicians, professional athletes and other celebrities
      have begun to adopt the MASH CULTURE LABLTM brand and that our brand has also
      been accepted in both the hip-hop and board sports communities. One of the
      keys
      to our success is being able to project a single image to our target market
      that
      readily defines the “MASH CULTURE LABTM” brand. This image will include the “Cock
      Camo” and it will be complimented with the tag line “Get Cocky”. The “Get Cocky”
slogan and “COCK CAMO” image will be supported by a multiple media campaign
      aimed at:





·
            Driving
                consumer demand by demonstrating the appeal the brand has with leading
                trendsetters and tastemakers within the “Mash”
                market;


·
            Educating
                the retail buying community that “MCLTM” is a leader in the “Mash” market
                and that its designs and irreverent attitude typifies the “Mash” market;
                and,


·
            Focusing
                on defining to our target market the attitude and style of the brand.





We
      seek
      to distinguish MCLTM from other brands in the marketplace. We believe that there
      are very few brands whose name actually is descriptive of a global youth
      movement. Our experience with this brand has told us that there is a sizable
      population who associate MASH CULTURE LABTM as the next global
      trend.





1)  Product—We
      seek to associate the name MASH CULTURE LABTM with quality and style. The
      garments themselves are designed with words, images and artwork that are
      illustrative of unity and diversity. The garments, in both body and
      embellishment, are indicative of a crossover brand that is comfortable within
      the “Mash” market. We believe that a product boldly representing diversity and
      unity on the outside of the garment can be a mainstay from season to season.
      The
      Company has evolved its product offering from T’s and hats to a full collection
      offering various tops, bottoms, outerwear, headwear and
      accessories.





2)  Logos
—
      We have found that the brand name MASH CULTURE LABTM or MCLTM” has a wide appeal,
      but not all of our audience is comfortable with a heavily branded garment.
      The
      brand’s crossover appeal as well as a wider acceptance in the target market is
      much more accessible through another logo that we have developed. The “ROOSTER,”
also known as the “Cock” has become more popular and recognized with the
      consumer and retail buyer. We believe that the “ROOSTER” logo is attractive to
      the emerging “Mash” market. We believe that this allows the brand to be less
      obtrusive while still maintaining its edge with the trendsetters. This logo
      will
      be the central focal point of our national “Get Cocky” campaign that was
      initiated in May 2006. We will seek to market the brand through a multiple
      media
      front that includes guerilla/street marketing, radio, print, interactive and
      mobile media. The “Cock Camo” will be used in varying ways on our garments as
      well as on our website.





3)  Guerilla/Street
      Marketing — The Company implemented a street marketing campaign in May 2006
      aimed at the Los Angeles, New York, Chicago, Atlanta, Miami and Seattle markets.
      These markets were chosen due to their fashion and musical influence, geographic
      location or their proximity to large retail markets buying home offices. This
      program is managed internally by Kerry Sessions, Director of Marketing, who
      has
      over 12 years of street/guerilla marketing experience with Warner Brothers,
      EMI
      Capital, Sony music and many fashion companies. Mr. Sessions will direct teams
      in each market with the purpose of creating brand awareness, drive traffic
      to
      WWW.GETCOCKY.com, drive consumers to retail stores to request the MCLTM brand and
      push the image campaign of “Get Cocky” in each market. This imagery will be
      positioned in each market with the use of stickers, stencils, wild postings,
      independent music CD’s and many other hand to hand marketing techniques, subject
      to financing. Our guerilla marketing campaign will expand in the 3rd quarter
      of
      2006 to an additional 4 major markets in the United States





4)  Traditional
      Advertising - We intend to use traditional advertising to ensure that both
      the
      consumer and the retail buyer understand the brand. We initiated a radio
      campaign in the New York City market with the #1 Hip Hop/R&B radio station,
      HOT 97, an Emmis Communications property. This radio station has one of the
      largest listening audiences in the country and a loyal fan base that fully
      supports the hip-hop culture. By positioning ourselves with Hot 97, MCLTM is
      becoming more accepted within a very skeptical audience further heightening
      our
      street credibility. The Get Cocky Campaign was kicked off in March of 2006.
      The
      Company will also use traditional advertising in national magazines and trade
      publications to further solidify the “Get Cocky” campaign. We believe it is
      necessary to target both the consumer and the retail buyer. The magazines that
      the Company is targeting are DNR, Women’s Wear Daily, Fader, Giant, Slam, Vibe,
      944, Elle, Vogue, Lucky and Nylon among many others.





5)  Publicity-
      The Company has engaged CaroMarketing, a Los Angeles based PR and marketing
      firm, to garner free publicity through editorial coverage and product placement
      in national magazines. To date, the Company has received product placement
      and
      editorial coverage in over 40 magazines. In addition, CaroMarketing is
      responsible for gifting celebrities with all products distributed or produced
      by
      the Company. The firm has a full showroom inside its offices filled with MASH
      CULTURE LABTM, WHITEBOY® for men and WHITEBOY® for girls product for the sole
      purpose of having celebrity stylists pick out clothes for their celebrity
      clients and for fashion editors to choose styles for placement in their
      magazines. The WHITEBOY® for men brand has been photographed on nearly 100
      celebrity actors, musicians and athletes, while MASH CULUTRE LABTM has been
      photographed on over 20 celebrities in a 2 month period. CaroMarketing is also
      charged with attracting national companies to co-brand with that are targeting
      the “Mash” market. The focus in the early months for CaroMarketing will be to
      supplement the street and on air campaigns of “Get Cocky” with aggressively
      seeking editorial coverage for this campaign. Services of CaroMarketing are
      provided on a month-to-month basis.





6)  Fashion
      and Style Shows - We intend to use high profile fashion and style shows to
      highlight the garment and the brand’s message. We believe these fashion shows
      will garner editorial or pictorial coverage by today’s top fashion and trade
      magazines. While the use of celebrities can drive consumer demand, the Company
      has realized that focusing on the retailer is also important. Fashion shows
      are
      targeted to the buyers. They have to feel confident that the garment is quality
      and that a brand called MASH CULTURE LABTM is a fully merchandised collection
      that they can support season after season.





30




7)  Sales
      Venues - We intend to drive consumers to an eventual WHITEBOY® store located in
      Los Angeles and to our on-line stores at WWW.WHITEBOY.COM , WWW.MASHULTURELAB.COM and
      eventually WWW.WHITEBOYGIRL.com. The Company plans to open a WHITEBOY® retail
      store within the next 12 months and this store will house all of the Company’s
      brands. The store will generate publicity for all the brands, but it has a
      more
      significant role in the overall marketing campaign. We will begin by marketing
      our WHITEBOY® retail store as a destination point when visiting LA. A WHITEBOY®
store that projects the socially conscious, irreverent attitude and the latest
      in hip ready to wear clothing will be marketed all over the world. By
      advertising or obtaining editorial coverage for all our brands in travel and
      tourism guides, we hope to drive the message that the WHITEBOY® store is a must
      see when visiting the Los Angeles area. Those who cannot visit Los Angeles
      to
      experience the WHITEBOY® store may go to our on-line to find out more about the
      brands. We anticipate that this marketing technique and store front will provide
      several attributes: (a) consumers will be driven to our two most visible, high
      margin centers; (b) we will be able to educate and create brand awareness
      worldwide; (c) we can test new product for retail distribution; and (d) we
      can
      create an environment for developing custom clothing for celebrities which
      we
      hope will drive product development for our retail distribution.





8)  Interactive
      Marketing — The Company currently has a dedicated employee who spends 25 hours
      weekly on-line exposing all our brands to their respective target markets.
      The
      primary sources for this exposure are through both a popular on-line social
      network called “MySpace” and a technique know as “Blogging”. The “Myspace” site
      is completely indicative of the “Mash” market and its need for
      individualization. The idea is to expose the brand to the trendsetters in
      markets outside of Los Angeles and New York City. We routinely target those
      emerging hip-hop artists, rock bands, models and emerging athletes who reside
      on
      MySpace. This has proved very successful in creating brand awareness in smaller
      markets by getting those local visible trendsetters to wear the WHITEBOY® and
      MASH CULTURE LABTM brands. Thus, we have created our own channel of brand
      enthusiasts in various markets to help us drive the “Get Cocky” campaign. We
      currently have over 3,000 members, of which 120 are willing to actively market
      on our behalf. Our goal is to reach 10,000 members in the MySpace site with
      500
      actively marketing by the beginning of 2007. The other aspect of our interactive
      campaign is the use of “Blogging”. The Company currently has an employee who
      primarily spends their time on line chatting up the attributes of all our
      clothing lines on popular websites around the world. The idea is to start an
      underground organic word of mouth campaign that gives credibility to our brands.
      The immediate impact of this was felt at the “1 ST Annual
      Get Cocky Awards” in New York City, where “Blogging” led directly to over
      100,000 people voting on line at WWW.MASHCULTURELAB.COM .
      This
      all occurred within three days of the site being launched. The future of
      interactive will consist of using mobile media. The Company is actively pursuing
      bids from mobile media companies to further boost the “Get Cocky” campaign. Our
      target consumer is becoming more and more dependent on their hand held PDAs
      or
      cell phones. The intent is to supplement the “Get Cocky” campaign of print and
      radio by driving the consumer to our website or to the local retailer carrying
      the MASH CULTURE LABTM line with the use of game codes sent to them through their
      cell phones or PDAs. The goal is to attract thousands of potential MASH CULTURE
      LABTM consumers to our on-line stores by having them “opt in” to purchase goods.
      By doing this, the Company is able to capture and own the data on every “opt in”
participant in order to market future MASH CULTURE LABTM products or other
      Company owned brands to this targeted consumer group.




***Business
      Strategy.***





Our
      goal
      is to become an industry-leading design, intellectual property, sales and
      marketing organization. The Company’s growth will come from the in-house
      development of its own trademarked brands, private labels or through the
      acquisition of other apparel brands. The Company will continue to acquire and
      or
      trademark edgy terms and slogans with the idea that they can be developed into
      lines of apparel and accessories for in-house development and/or private label
      opportunities. Thus, our business strategy encompasses elements from our
      marketing strategy. In order to become a leading design, sales and marketing
      firm, our approach is to attract top-level management, cutting-edge designers
      and create world-class marketing alliances.





We
      have
      accumulated a family of what we believe to be marketable trademarked brands
      with
      the anticipation they will be released over the next three to five years. Our
      business strategy will be tailored to each brand as it is released into the
      marketplace. We intend to feature WHITEBOY® for men as the model for our
      business strategy as it is the first brand to be released. WHITEBOY® for men
      begins shipping in September 2006 to its high-end retail base and is currently
      showing the Fall 2006 line. Our mass distributed brand MASH CULTURE LABTM was
      launched in July of 2006 and begins shipping in August 2006. The Company is
      currently showing both Fall 2006 and Spring 2007 for the MASH CULTURE LABTM
brand. In July 2006, the Company also launched at the POOL TRADE SHOW in New
      York our young “contemporary” line WHITEBOY® for girls. The release of WHITEBOY®
for girls is the second brand that the Company is targeting for mass
      distribution and intends to begin shipping in January of 2007. This brand can
      be
      viewed as the sister brand of MASH CULTURE LABTM as they will share our iconic
“Rooster” and utilize the same “Get Cocky” marketing campaign. The Company is
      currently developing two other intellectual properties known as BLACK JESUS® and
      PYTTM (Pretty Young Thing). We feel that these two brands have the potential for
      global distribution upon their development. The Company is currently seeking
      marketing partners to help launch the BLACK JESUS line and will be targeting
      a
      launch in 2007. PYT will be shopped as a private label opportunity. The Company
      considers private label or licensing of apparel a potential solution for some
      of
      its current brands as well as future acquired intellectual property. A
      significant part of the company’s growth strategy is seeking out established and
      or emerging apparel brands for acquisition over the next twelve months.





31




Show
      Rooms and Sales Organization — The Company has contracted with NYC Showroom,
      located in New York, New York on a monthly basis to serve as our sales showroom
      in the Northeast. This showroom currently houses the WHITEBOY® for men line and
      MASH CULTURE LABTM lines of clothing. This is a destination spot for retail
      buyers from the Mid-Atlantic through the New England area to review the line
      for
      placement in their retail stores. In addition, the NYC showroom serves as a
      place for the East Coast Media and stylists to review the line for editorial
      coverage, product placement and celebrity gifting. The showroom has three
      fulltime sales people who work on our brands. Fees are a monthly fixed fee,
      plus
      a percentage of sales from the NYC Showroom.





Our
      Los
      Angeles showroom is located in our home office and serves as the focal point
      of
      all our brands for the west coast serving celebrities, retail buyers, media
      and
      stylists. Our National Sales Manager and our Director of West Coast Sales
      operate both on a national and regional level from this location.





We
      also
      have sales representatives to serve the Midwest, operating out of Chicago,
      Illinois, the Southeast operating out of Miami and the Southwest operating
      out
      of Dallas. These positions typically cover larger regional areas of 10-15 states
      and the sales representatives are compensated on a percentage of
      sales.





The
      Company is also reviewing proposals for contracted sales representatives and
      or
      distributors in Canada, Japan, Australia and various territories in
      Europe.





The
      use
      of a sales force will differ with respect to domestic and international sales.
      Domestically, we will use a network of seasoned independent contractors as
      our
      sales force. These sales representatives typically operate regionally on a
      commission basis. We intend to have, at a maximum, nine sales representatives,
      located in various regions of the United States. These independent sales
      representatives report to our National Sales Manager (NSM). The NSM will
      eventually operate out of the Company storefront. The NSM will be responsible
      for selling to and establishing relationships with key individual specialty,
      specialty chain and department stores on a national basis. Once the NSM sets
      up
      these accounts in a specific region, then that person will recruit seasoned
      sales representatives to service the existing customers and to continue to
      develop new customers in their defined region. Ultimately, we believe this
      process will allow us to have national coverage with local and region service
      for our customers.





Internationally,
      we are seeking distributors on a country-by-country basis to represent and
      sell
      our core products. The use of distributors allows us to quickly expand
      distribution while giving each specific country a dedicated sales force to
      service our customers.




***Distribution.***





The
      first
      step in our strategy for MASH CULTURE LAB®, WHITEBOY® for men and WHITEBOY® girl
      or any of our brands will be to create awareness. We believe that a
      multi-faceted image based marketing program will lead to brand awareness. As
      the
      marketing program takes hold, we will concentrate first and foremost on growing
      our distribution channels for our core products. The initial step with all
      our
      brands will be to introduce those core products into high profile, high-margin
      specialty accounts in the New York and Los Angeles retail markets. We believe
      that these are the key retail doors that influence hundreds of retailers
      domestically and internationally. The Company has secured orders for delivery
      in
      the fall to some of the better known names in fashion and street wear, including
      Fred Segal, YRB, Virgin Mega Stores and Dr. Jays.





We
      anticipate that we will expand our domestic retail distribution by seeking
      out
      retailers in other major markets as well as national and regional specialty
      chains. The Company has secured fall orders in such specialty chains as Virgin
      Megastores, Dr. Jays, Retail Apparel, Active Warehouse and Gliks. The Company
      has received an all door recommendation for MASH CULTURE LABTM from Federated
      Department Stores’ General Merchandising Manager and will be working with each
      region individually to secure orders. The Company is also targeting other large
      chains such as the Buckle, Zumies, Tilly’s, Hot Topic, Against All Odds, Jimmy
      Jazz, Metropark, Bob’s, Man Alive, the College Book Stores and Gotchalks for
      both MASH CULTURE LABTM and WHITEBOY® for girls.





We
      believe that expansion of our current domestic specialty-store base in Los
      Angeles will create larger distribution opportunities. If we are successful
      in
      establishing ourselves in the specialty market, specialty chain market and
      or
      department store level, then there is an opportunity to expand distribution
      internationally. The international distribution community routinely seeks out
      successful United States brands currently selling in both specialty and
      specialty chain stores and immediately looks to negotiate exclusive rights
      for
      their given territories. We will seek exclusive distribution opportunities
      in
      several countries in Europe, along with Japan, Canada and Australia, some of
      which we are currently in negotiations.





Domestically,
      we are expanding distribution efforts by entering the department store phase
      for
      both MCLTM and WHITEBOY® for girls. The Company has received corporate approval
      from Federated and the Bond (Macy’s West) for MASH CULTURE LABTM. Their
      acceptance at a corporate level will further expand our ability to license
      other
      products (apparel and non-apparel) worldwide and allow us to enter into
      manufacturing licenses for our core products (apparel) in the international
      community.





Product
      licensing is another area of rapid growth that may create high-margin recurring
      revenue streams. We intend to enter into licensing agreements for products
      outside of our core product offering. These products may include: footwear,
      undergarments, surfboards, skateboards, cell phones, credit cards, and similar
      products attractive to our target consumer. We intend to concentrate on
      developing knit tops, fleece, outerwear, headwear, bottoms and other simple
      accessories while relying on the expertise of established
      manufacturers/distributors to rapidly expand the brand name in other product
      categories. The Company is willing to enter into manufacturers’ licenses for its
      core product in various international territories where we believe that such
      an
      arrangement will produce greater revenues at a lower cost of doing business
      than
      the Company can provide. The Company is actively pursuing these arrangements
      today.





32





***Warehousing
      and Order Fulfillment.***





Our
      warehousing and order fulfillment services for MASH CULTURE LABTM and WHITEBOY®
for girls is provided by JAM, located in Gardena, California. Services are
      contracted on a monthly basis, pay a per box storage charge, plus a per unit
      fee
      to pick, pack and ship. Although we depend on JAM for these services, we believe
      that we could engage comparable service providers on similar terms if necessary.
      WHITEBOY® for men and all on-line orders will be processed and distributed from
      our office and warehouse facility.





***Production.***





As
      part
      of our growth strategy, production considerations will be as crucial as our
      distribution strategy. We produced domestically until the fall 2006 season.
      The
      use of domestic production had allowed us to create product much more quickly
      for our customers, but at a higher price than an import program would allow.
      The
      WHITEBOY® for men brand is currently produced domestically and will continue to
      do so because of its need for quick turn production. This brand is highly
      customizable and it is not price sensitive due to its wholesale pricing
      structure that ranges from $25 to $250 per garment. MASH CULTURE LABTM and
      WHITEBOY® for girls are mass brands that will have large volume production
      orders. We believe it is necessary for us to source and produce most of our
      products overseas for these two brands. We anticipate that the use of overseas
      production, or an import program, will offset the pricing reductions sometimes
      demanded by national retailers. We expect that our overall margins will improve
      as well as the quality of our core product offering regardless of the
      distribution pattern. We are currently sourcing our core offering for these
      two
      brands in Mexico, China, India and Pakistan. We intend to have 95% of our
      production for MASH CULTURE LABTM and WHITEBOY® for girls done outside of the
      United States to take advantage of the pricing differential for the fall 2006
      deliveries. Our overseas production is currently underway.





Our
      production department is currently managed by our Director of Production who
      directs two in-house sample makers. The Director of Production overseas all
      production and sourcing. Her international experience allows us to take
      advantage of the best raw materials, applications and production techniques
      at
      the best possible pricing. Our philosophy with respect to production is to
      source worldwide for the best raw materials and to produce samples locally
      to
      drive new and innovative garments.





**Manufacturing.**





We
      have
      the following manufacturing arrangements:





The
      Trio
      Group is a 25 yr old company with sourcing offices in Montreal, Toronto, India
      and China. Items of export include men’s shirt, shorts, jackets, pants, boxer
      shorts and ladies skirts, tops, dresses, shorts, pants and trousers. Trio
      specializes in providing quality clothing to the surf, ski, skate and street
      wear an urban wear markets. Production arrangements are contracted via purchase
      orders.





GT
      World
      produces men’s shirts, shorts, jackets, pants, boxer shorts and ladies skirts,
      tops, dresses, shorts, pants and trousers. GT specializes in providing quality
      clothing to the surf, ski, skate and street wear/urban wear markets. Production
      arrangements are contracted via purchase orders.





Although
      we depend on these manufacturers to produce our products, we believe that we
      could engage comparable manufacturers on similar terms if
      necessary.





***Design.***





Design
      is
      the key to our organization. We have three principal brands in operation today
      and two more in the developmental stage, WHITEBOY® for men, WHITEBOY® for girls
      and MASH CULTURE LABTM are in operation with the Company looking to develop BLACK
      JESUS â and
      PYTTM ,
      which
      we believe are provocative and appealing to the best designers. We expect to
      work to develop five distinctly different design teams for each brand. To date,
      we have concentrated on WHITEBOY® for men, MASH CUTLURE LABTM and most recently
      WHITEBOY® for girls. The Company currently has a men’s design director for MASH
      CUTLURE LABTM who is responsible for defining the brand’s image at the direction
      of our management. The design director develops and determines the artwork,
      fabrics, seasonal colors, applications and bodies of our core product offering.
      Additionally, the design director will help build a design team that includes
      a
      junior designer, two graphic artists and a technical illustrator. Additionally,
      we have recently hired a women’s design director for the WHITEBOY® for girls
      collection to complement the MASH CUTLURE LABTM collection. She will also
      determine the WHITEBOY® for girls artwork, fabrics, seasonal colors,
      applications and bodies for the core offering. The men’s and women’s design
      directors for MCLTM and WHITEBOY® for girls both report directly to the
      President. WHITEBOY® for men utilizes guest celebrity artists/entertainers to
      design its seasonal collection and this designer also reports directly to the
      President.





33




**Competition.**





We
      operate in a highly competitive industry and we compete with literally hundreds
      of design based apparel companies, many of which have resources greater than
      ours.





As
      we
      conceive it, our “Mash Market” brands encompasses a little of the board market,
      some of the urban market and the unique combination in between. We intend to
      compete by developing our brands, capitalizing on the demand for clothing and
      accessories that appeal to youthful buyers aged 13 through 29, who identify
      with
      the emerging “Mash Market”, and building our brands to reflect this new
      style.





Of
      the
      major brands in both the board and urban markets, the most dominant brand today
      is Quiksilver, Inc. (NYSE:ZQK). Quiksilver has grown its business in specialty,
      specialty chain, department stores, licensing and worldwide distribution while
      remaining true to its loyal board enthusiasts. The surf industry is dominated
      by
      Quiksilver, Billabong and Rip Curl. Together, these three generate over half
      of
      the estimated $4 billion in worldwide sales for the surf industry.





The
      leading urban brands include Rapper Producer P. Diddy Combs’ line of apparel
      sold under the Sean John label, ECKO Enterprises, Baby Phat, Phat Farm, Dickies,
      and Akademics. We believe that MASH CUTLURE LABTM is a crossover brand
      incorporating elements from both urban and skate lifestyle, though it is most
      similar to the marks used by ECKO Enterprises.





We
      believe WHITEBOY® for girls, whose target is 15-24 year old females known as a
      young “contemporary” market, competitors are inclusive but not limited to
      Harajuku Lovers, Morphine Generation, Miss Sixty, 2 Be Free and Juicy
      Couture.





WHITEBOY®
      for men is unique in the market with its customized collections. Thus, we feel
      that the direct competition is limited.





We
      believe that the quality of our apparel and our pricing are consistent with
      those of our competitors.





***Compliance
      with Regulations.***





We
      believe we are in compliance with all government regulations as they pertain
      to
      the garment industry, including labor laws and postings as required by federal,
      state and local jurisdictions. We routinely check the license and permits of
      all
      of our vendors to ensure that they are compliant with all local, state and
      federal rules, regulations and statutes.





***Product
      Development.***





Our
      product development is performed in-house. Our men’s design director and
      director of production are responsible for sourcing new styles, embellishments,
      fabrics and applications. They use many sources for inspirations and various
      services for the forecasting of trends and analysis. We also employ two fulltime
      sample makers who cut, sew and assemble the new designs and fabrics into the
      latest styles. Eventually, our goal is to use our storefront to test our new
      products. We believe that the WHITEBOY® store will be one of the most useful
      resources for product development. We intend to select the most successful
      new
      products in the WHITEBOY® store and expand them for our eventual worldwide sales
      team to sell and distribute. We believe that this will be a cost-effective
      method to test new product without the full cost of sampling. The process of
      sampling is continuous and crucial to our success. We expect that the
      development of new and innovative products is one of the main factors to
      achieving success. The Company also routinely conducts focus groups with our
      target market to learn their opinions on our designs, marketing direction and
      to
      better understand pop culture.





***Intellectual
      Property.***





We
      hold
      several trademarks in various countries and classifications. Our principal
      marks, WHITEBOY® (includes both the women’s and men’s collection), WHITE DEVIL®
and BLACK JESUS®, were registered for use on various clothing items with the
      U.S. Patent and Trademark Office in 2004, while MASH CULUTRE LAB Ô ,
      and
      MCL Ô ,
      were
      registered in 2006. We have also applied to use the WHITEBOY® mark on musical
      sound recordings, entertainment services, jewelry, bumper stickers, sports
      and
      tote bags, belt buckles, and skate and snowboarding equipment, and these
      applications are currently pending. In addition, we soon intend to seek to
      secure the Madrid Protocol in Class 25 (apparel) for the mark WHITEBOY® and
      eventually for the marks BLACK JESUS® and MASH CULTURE LABTM. This is a single
      filing that provides rights in 60 countries at the cost of approximately $15,000
      each. We currently have rights for WHITEBOY® in apparel in the United States,
      Canada, Japan, Australia and 25 countries in Europe. We own the domain names
      www.theblackjesus.com, www.WHITEBOYstore.com, www.getcocky.com , www.whiteboygirl.com , www.mashculturelab.com , www.sub-urbanbrandsinc.com ,
      and
      www.WHITEBOYstore.net. We rent the domain name www.WHITEBOY.com, and we are
      pursuing acquiring ownership of the name. The cost of renting the name is
      included in our website hosting fees. We have also registered our rooster logo
      design for use on musical sound recordings, and have applied to register that
      design for use on clothing and related accessories, snow and
      skateboards.





34




***Our
      Website.***





Our
      websites are located at www.whiteboy..com , www.mashculturelab.com , www.whiteboygirl.com .
      The
      company owns the content on those websites. The sites feature ordering
      information, news of upcoming publicity and musical events and content of
      interest to our target market. The site is hosted by Globat.com, a hosting
      service for websites and email. We administer the site, which includes effecting
      updates and monitoring associated email accounts. Our web store is hosted by
      Wing Interactive, a provider of secure e-commerce web commerce sites and we
      administer the web store for pricing and items offered. Our annual hosting
      fees
      are less than $2,000 per year, though our contracts for these services are
      on a
      month-to-month basis and can be cancelled at anytime. We believe that we could
      obtain these services from other providers at comparable rates without
      difficulty. Our website is not a part of this report.





***Employees.***





We
      have
      12 full-time employees, plus 8 independent contractors. We believe relations
      with our employees are good. None of our employees or independent contractors
      is
      covered by any collective bargaining agreements. We believe our future success
      depends in large part upon the continued service of our senior management
      personnel and our ability to attract and retain highly qualified managerial
      personnel.





***Facilities.***





The
      Company is discontinuing its operations at 2222 Suite B, East Washington Blvd,
      Los Angeles, CA 90021 on 8/21/2006 and moving to a larger office and warehouse
      facility at 8723 Bellanca, Bldg B Los Angeles, CA 90045. We will lease
      approximately 10,000 square feet office, sample production and fulfillment
      space. The lease is for 38 months with an approximate base rent of $8,931 to
      $9,569 over the term of the lease.




**Risk
      Factors**





**RISKS
      RELATED TO OUR BUSINESS**





**The
      Company recently acquired SUI, which had a limited operating history, and,
      accordingly, is subject to substantial risks inherent in the commencement of
      a
      new business enterprise. Prior to the acquisition of SUI, the Company had no
      operations.**





We
      have
      incurred losses since inception, including a loss of $2,689,842 in 2005, and
      expect to incur net losses for the foreseeable future.





**Our
      business strategy is unproven, and we may not be successful in addressing early
      stage challenges, such as establishing our position in the market and developing
      our products and services. To implement our business plan, we will require
      additional financing. We cannot guaranty that such additional financing will
      be
      available. In the absence of additional financing we may be required to
      significantly reduce our operations.**





Our
      prospects must be considered speculative, considering the risks, expenses,
      and
      difficulties frequently encountered in the establishment of a new business,
      specifically the risks inherent in developmental stage companies. We expect
      to
      continue to incur significant operating and capital expenditures and, as a
      result, we expect significant net losses in the future. We cannot guaranty
      that
      we will be able to achieve profitable operations or, if profitability is
      achieved, that it will be maintained for any significant period, or at all.
      If
      we are unable to achieve profitable operations, investors will likely lose
      their
      entire investment.





We
      may
      not be successful in the implementation of our business strategy or our business
      strategy may not be successful, either of which will impede our development
      and
      growth. Our business strategy involves leveraging brand acceptance into
      profitable sales and licensing opportunities. Our ability to implement this
      business strategy is dependent on our ability to:





·
            Expand
                our product development;


·
            Identify
                and engage additional business
                opportunities;


·
            Sell
                our products to end consumers;


·
            Establish
                brand recognition and customer loyalty;
                and


·
            Manage
                growth in administrative overhead
                costs.





In
      assessing our ability to meet these challenges, a potential investor should
      take
      into account our lack of operating history and brand recognition, our
      significant losses since inception, our management’s relative inexperience, the
      competitive conditions existing in our industry and general economic conditions
      and consumer discretionary spending habits. Our growth is largely dependent
      on
      our ability to successfully implement our business strategy. Our revenues will
      be adversely affected if we fail to implement our business strategy or if we
      divert resources to a business strategy that ultimately proves
      unsuccessful.





35




Our
      continued development involves other significant risks, including but are not
      limited to:





An
      unproven business model;


Negative
      net cash flow since inception;


High
      investments in product development and marketing programs.


No
      guaranty of acceptance of our products and services.


Changes
      in style and trends.


Raw
      material shortages.


Changes
      in consumer spending.





**We
      depend on independent manufacturers and suppliers of raw materials, which
      reduces our ability to control the manufacturing process, which could harm
      our
      sales, reputation and overall profitability.**





We
      depend
      on independent contract manufacturers and suppliers of raw materials to secure
      a
      sufficient supply of raw materials and maintain sufficient manufacturing and
      shipping capacity in an environment characterized by declining prices, labor
      shortage, continuing cost pressure and increased demands for product innovation
      and speed-to-market. This dependence could subject us to difficulty in obtaining
      timely delivery of products of acceptable quality. In addition, a contractor’s
      failure to ship products to us in a timely manner or to meet the required
      quality standards could cause us to miss the delivery date requirements of
      our
      customers. The failure to make timely deliveries may cause our customers to
      cancel orders, refuse to accept deliveries, impose non-compliance charges
      through invoice deductions or other charge-backs, demand reduced prices or
      reduce future orders, any of which could harm our sales, reputation and overall
      profitability.





**We
      do not have long-term contracts with any of our independent contractors and
      any
      of these contractors may unilaterally terminate their relationship with us
      at
      any time. While we believe there is an adequate supply of contractors to provide
      products and services to us, to the extent we are not able to secure or maintain
      relationships with independent contractors that are able to fulfill its
      requirements, our business would be harmed.**





We
      have
      initiated standards for our suppliers, and monitor our independent contractors’
compliance with applicable labor laws, but we do not control our contractors
      or
      their labor practices. The violation of federal, state or foreign labor laws
      by
      one of our contractors could result in us being subject to fines and our goods
      that are manufactured in violation of such laws being seized or their sale
      in
      interstate commerce being prohibited. To date, we have not been subject to
      any
      sanctions that, individually or in the aggregate, have had a material adverse
      effect on our business, and we are not aware of any facts on which any such
      sanctions could be based. There can be no assurance, however, that in the future
      we will not be subject to sanctions as a result of violations of applicable
      labor laws by our contractors, or that such sanctions will not have a material
      adverse effect on our business and results of operations.





**We
      have limited existing brand identity and customer loyalty; if we fail to develop
      and maintain our proposed brand, our business could
      suffer.**





The
      Company must establish a strong brand identity in order to be successful in
      a
      highly competitive environment. We have determined that there is an affinity
      to
      the term “WHITEBOY®” and MASH CULTURE LAB Ô within
      our targeted consumer groups, but this is no guaranty that the Company will
      be
      able to establish brand loyalty. Our targeted consumer must quickly identify
      the
      brand “WHITEBOY®” and MASH CULTURE LAB Ô with
      their corresponding logos and icons.





**We
      may not be able to operate profitably if we fail to anticipate and interpret
      fashion trends.**





We
      believe that our success depends in part on our ability to anticipate, gauge
      and
      respond to changing consumer demands and fashion trends in a timely manner.
      We
      propose to target the market of young people aged 13 through 29 who identify
      with the “urban” and/or “board” segments of that market. We cannot guaranty that
      we will be successful in anticipating consumer tastes and preferences. If we
      misjudge the market for our proposed line of clothing and accessories, we may
      be
      faced with a significant amount of unsold inventory, which could keep us from
      generating profits.





**Our
      inability to obtain sufficient financing will harm our development and growth
      strategy.**





We
      will
      require substantial amounts of working capital to fund our business and we
      cannot guaranty that additional financing will be available. We expect to
      require substantial additional capital to fund our development and operating
      expenses. We cannot be certain that any additional financing will be available
      to us on favorable terms when required, or at all. If we are unable to obtain
      sufficient additional capital when needed, we could be forced to alter our
      business strategy, delay or abandon some of our development plans or terminate
      our operations. In addition, if we raise additional funds through the issuance
      of equity, equity-linked or debt securities, such securities may have rights,
      preferences or privileges senior to those of the rights of our Common Stock
      and
      our stockholders may experience additional dilution.




We
      currently operate three principal brands, WHITEBOY® for men, WHITEBOY® for girls
      and MASH CULTURE LABTM. If we are unable to successfully market and distribute
      these brands, or if the recent popularity of “urban” and “board” related brands
      decreases, or if we are unable to execute on our multi-brand strategy to acquire
      and/or license additional companies and/or brands, as applicable, identified
      by
      our management from time to time, our results of operations and financial
      condition will be adversely affected.




36




**Our
      operating results may fluctuate significantly.**





Management
      expects that we will experience substantial variations in our net sales and
      operating results from quarter to quarter. We believe the factors that influence
      this variability of quarterly results include:





·
            the
                timing of our introduction of new product
                lines;


·
            general
                economic and industry conditions that affect consumer spending and
                retailer purchasing;


·
            the
                availability of manufacturing
                capacity;


·
            the
                seasonality of the markets in which we
                participate;


·
            the
                timing of trade shows;


·
            the
                product mix of customer orders;


·
            the
                timing of the placement or cancellation of customer
                orders;


·
            the
                weather;


·
            transportation
                delays;


·
            quotas
                and other regulatory matters;


·
            the
                occurrence of charge backs in excess of reserves;
                and


·
            the
                timing of expenditures in anticipation of increased sales and actions
                of
                competitors.





As
      a
      result of fluctuations in our revenue and operating expenses that may occur,
      management believes that period-to-period comparisons of our results of
      operations may not necessarily indicate future performance.





**The
      financial condition of our customers could affect our results of operations.**





Certain
      retailers, including some of our customers, have experienced in the past, and
      may experience in the future, financial difficulties, that increase the risk
      of
      extending credit to such retailers and the risk that financial failure will
      eliminate a customer entirely. These retailers have attempted to improve their
      own operating efficiencies by concentrating their purchasing power among a
      narrowing group of vendors. There can be no assurance that we will remain a
      preferred vendor for our existing customers. A decrease in business from or
      loss
      of a major customer could harm our results of operations. There can be no
      assurance that our factor will approve the extension of credit to certain retail
      customers in the future. If a customer’s credit is not approved by the factor,
      we could assume the collection risk on sales to the customer itself, require
      that the customer provide a letter of credit, or choose not to make sales to
      the
      customer.





**Our
      business is subject to risks associated with importing products.**





A
      portion
      of our import operations are subject to tariffs imposed on imported products
      and
      quotas imposed by trade agreements. In addition, the countries from which our
      products are imported may from time to time impose additional new duties,
      tariffs or other restrictions on its imports or adversely modify existing
      restrictions. Adverse changes in these import costs and restrictions, or our
      suppliers’ failure to comply with customs or similar laws, could harm our
      business. We cannot assure that future trade agreements will not provide our
      competitors with an advantage over us, or increase our costs, either of which
      could have an adverse effect on our business and financial
      condition.





**Our
      operations are also subject to the effects of international trade agreements
      and
      regulations such as the North American Free Trade Agreement, and the activities
      and regulations of the World Trade Organization.**





Generally,
      these trade agreements benefit our business by reducing or eliminating the
      duties assessed on products or other materials manufactured in a particular
      country. However, trade agreements can also impose requirements that adversely
      affect our business, such as limiting the countries from which we can purchase
      raw materials and setting duties or restrictions on products that may be
      imported into the United States from a particular country.





**Our
      ability to import raw materials in a timely and cost-effective manner may also
      be affected by problems at ports or issues that otherwise affect transportation
      and warehousing providers, such as labor disputes.**





These
      problems could require us to locate alternative ports or warehousing providers
      to avoid disruption to our customers. These alternatives may not be available
      on
      short notice or could result in higher transit costs, which could have an
      adverse impact on our business and financial condition.


37





**We
      may not be able to adequately protect our intellectual property rights.**





The
      loss
      of or inability to enforce our trademarks, including “WHITEBOY®” and MASH
      CULTURE LAB Ô or any
      of our other or future proprietary or licensed trademarks, designs, patents,
      know-how and trade secrets could adversely affect our business. If any third
      party copies or otherwise gains access to our trademarks or other proprietary
      rights, or develops similar products independently, it may be costly to enforce
      our rights and we would not be able to compete as effectively. Additionally,
      the
      laws of foreign countries may provide inadequate protection of intellectual
      property rights, making it difficult to enforce such rights in those
      countries.





**We
      may need to bring legal claims to enforce or protect our intellectual property
      rights.**





Any
      litigation, whether successful or unsuccessful, could result in substantial
      costs and diversions of resources. In addition, notwithstanding the rights
      we
      have secured in our intellectual property, third parties may bring claims
      against us alleging that we have infringed on their intellectual property rights
      or that our intellectual property rights are not valid. Any claims against
      us,
      with or without merit, could be time consuming and costly to defend or litigate
      and therefore could have an adverse affect on our business.





**The
      loss of our designers and creative staff would harm our future development
      and
      could significantly impair our ability to achieve our business objectives.**





Our
      success is largely dependent upon the expertise and knowledge of our management
      and our principal creative staff, and our ability to continue to hire and retain
      other key personnel. The loss of any of our key personnel could have a material
      adverse effect on our business, development, financial condition, and operating
      results. We do not maintain “key person” life insurance on any of our management
      or key personnel.





**RISKS
      RELATED TO OUR INDUSTRY**





**Our
      sales are heavily influenced by general economic cycles.**





Apparel
      is a cyclical industry that is heavily dependent upon the overall level of
      consumer spending. Purchases of apparel and related goods tend to be highly
      correlated with cycles in the disposable income of our consumers. Our customers
      anticipate and respond to adverse changes in economic conditions and uncertainty
      by reducing inventories and canceling orders. As a result, any substantial
      deterioration in general economic conditions, increases in interest rates,
      acts
      of war, terrorist or political events that diminish consumer spending and
      confidence in any of the regions in which we compete, could reduce our sales
      and
      adversely affect our business and financial condition.





**The
      apparel industry is highly competitive.**





We
      face a
      variety of competitive challenges including:





·
            anticipating
                and quickly responding to changing consumer
                demands;


·
            developing
                innovative, high-quality products in sizes and styles that appeal
                to
                consumers;


·
            competitively
                pricing our products and achieving customer perception of value;
                and


·
            the
                need to provide strong and effective marketing
                support.





**We
      must successfully gauge fashion trends and changing consumer preferences to
      succeed.**





Our
      success is largely dependent upon our ability to gauge the fashion tastes of
      our
      customers and to provide merchandise that satisfies retail and customer demand
      in a timely manner. The apparel business fluctuates according to changes in
      consumer preferences dictated in part by fashion and season. To the extent
      we
      misjudge the market for our merchandise, our sales may be adversely affected.
      Our ability to anticipate and effectively respond to changing fashion trends
      depends in part on our ability to attract and retain key personnel in our
      design, merchandising and marketing staff. Competition for these personnel
      is
      intense, and we cannot be sure that we will be able to attract and retain a
      sufficient number of qualified personnel in future periods.





**Our
      business may be subject to seasonal trends.**





In
      the
      experience of our management, operating results in the targeted apparel industry
      in which we operate have been subject to seasonal trends when measured on a
      quarterly basis. This trend is dependent on numerous factors,
      including:




·
            trends
                among young shoppers;


·
            holiday
                seasons;


·
            climate;


·
            economic
                conditions; and


·
            numerous
                other factors beyond our control.





38




**Distributors
      may not accept our merchandise.**





In
      order
      to generate sales of our proposed apparel and accessory lines, we need to
      develop relationships with clothing manufacturers and distributors, and
      establish channels of distribution. We cannot guaranty that we can establish
      distribution in key locations through retail distributors of specialty shops
      and
      through chain stores. It is uncertain that our fashions or any new products
      or
      collections that we may add in the future will achieve success or profitability.
      Introducing new collections and products under a private label generally entails
      relatively high start-up costs and inefficiencies in producing, distributing,
      and marketing the initial limited quantities of such products. However, due
      to
      inefficiencies associated with operating a private label, we may not be able
      to
      obtain a sufficient inventory in these products. We cannot guaranty that any
      collection or product which we may introduce will achieve profitable sales
      levels. Expanding our operations or lines of merchandise also could require
      capital greater than our cash flow or available credit resources.





**Our
      success depends on our ability to attract and retain high quality management
      and
      independent contractors.**





We
      face
      significant competition in the recruitment of qualified employees. We also
      rely
      on the services of independent contractors for production and some our
      marketing, advertising and public relations programs. Our business may suffer
      if
      we are unable to recruit or retain a sufficient number of qualified employees,
      the costs of employee compensation or benefits increase substantially or the
      costs of outsourcing certain tasks to third party providers increase
      substantially. In addition, we will likely expend resources in training new
      employees and should we experience a high turnover during the course of our
      business, we may incur additional recruiting and training costs and our business
      may suffer.





**Our
      Articles of Incorporation and our Bylaws limit the liability of our officers
      and
      directors and include a provision eliminating or limiting the personal liability
      of our directors to the Company and its shareholders for damages for breach
      of
      fiduciary duty as a director.**





Moreover,
      the Corporation Code of Nevada provides for the indemnification, under certain
      circumstances, of officers and directors. Accordingly, directors may have no
      liability to our shareholders for any mistakes or errors of judgment or for
      any
      act of omission, unless such act or omission involves intentional misconduct,
      fraud, or a knowing violation of law or results in unlawful distributions to
      our
      shareholders.





We
      do not
      anticipate paying dividends on our Common Stock in the foreseeable future;
      but,
      rather, we plan to retain earnings, if any, for the operation and expansion
      of
      our business.





***RISKS
      RELATED TO OUR SECURITIES***





**A
      purchase of our Common Stock is speculative and involves significant risks.**





The
      Common Stock should not be purchased by any person who cannot afford the loss
      of
      his or her entire purchase price for the Common Stock. A purchase of the Common
      Stock would be “unsuitable” for a person who cannot afford to lose his or her
      entire purchase price for the Common Stock.





**Our
      Common Stock is currently listed for trading on the OTC Bulletin Board
      maintained by the National Association of Securities Dealers, Inc.**





Our
      Common Stock is thinly traded, meaning the number of persons interested in
      purchasing our shares at or near ask prices at any given time may be relatively
      small or non-existent. This situation is attributable to a number of factors,
      including the fact that we have a small number of freely tradable shares, and
      we
      are a small public company that is relatively unknown to stock analysts, stock
      brokers, institutional investors and others in the investment community that
      generate or influence sales volume, and that even if we came to the attention
      of
      such persons, they tend to be risk-averse and would be reluctant to follow
      a
      company of our size that is expanding into a related but new line of business
      as
      we are, or purchase or recommend the purchase of our shares until such time
      as
      we became more seasoned and proven. As a consequence, there may be periods
      when
      trading activity in our shares is minimal or non-existent, as compared to a
      seasoned issuer which has a large and steady volume of trading activity that
      will generally support continuous sales without an adverse effect on share
      price. We cannot give any assurance that a broader or more active public trading
      market for our Common Stock will develop or be sustained, or that current
      trading levels will be sustained. Due to these conditions, we give no assurance
      that shareholders will be able to sell shares at or near ask prices or at all
      if
      you need money or otherwise desire to liquidate your shares.





**If
      securities or industry analysts do not publish research reports about our
      business, our stock price and trading volume could decline.**





Small,
      relatively unknown public companies can achieve visibility in the trading market
      through research and reports that industry or securities analysts publish.
      However, to our knowledge, no analysts routinely cover our company. The lack
      of
      published reports by independent securities analysts could limit the interest
      in
      our stock and negatively affect our stock price. We have no control over
      research and reports these analysts publish or whether they will be published
      at
      all. If any analyst who does cover us downgrades our stock, our stock price
      could decline. If any analyst initiates and then ceases coverage of our company
      or fails to regularly publish reports on us, we could lose visibility in the
      financial markets or never achieve such visibility, which in turn could cause
      our stock price or trading volume to stagnate or decline.




39




**Shareholders
      may have difficulty selling our shares because they are deemed "penny stocks."**





Since
      our
      Common Stock is not listed on the Nasdaq Stock Market or any national securities
      exchange, if the trading price of our Common Stock is below $5.00 per share,
      trading in our Common Stock will be subject to the requirements of certain
      rules
      promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
      Act"). These rules require additional disclosures by broker-dealers in
      connection with any trades involving a stock defined as a penny stock. Such
      rules require the delivery, prior to any penny stock transaction, of a
      disclosure schedule explaining the penny stock market and the risks associated
      therewith and impose various sales practice requirements on broker-dealers
      who
      sell penny stocks to persons other than established customers and accredited
      investors (generally defined as an investor with a net worth in excess of
      $1,000,000 or annual income exceeding $200,000 individually or $300,000 together
      with a spouse). For these types of transactions, the broker-dealer must make
      a
      special suitability determination for the purchaser and have received the
      purchaser's written consent to the transaction prior to the sale. The
      broker-dealer also must disclose the commissions payable to the broker-dealer,
      current bid and offer quotations for the penny stock and, if the broker-dealer
      is the sole market maker, the broker-dealer must disclose this fact and the
      broker-dealer's presumed control over the market. Such information must be
      provided to the customer orally or in writing before or with the written
      confirmation of trade sent to the customer. Monthly statements must be sent
      disclosing recent price information for the penny stock held in the account
      and
      information on the limited market in penny stocks. The additional burdens
      imposed upon broker-dealers by such requirements could discourage broker-dealers
      from effecting transactions in our common stock, which could severely limit
      the
      market liquidity of the common stock and the ability of holders of the common
      stock to sell their shares.





**The
      market price of our Common Stock may be adversely affected by market volatility.**





The
      market price of our Common Stock is likely to be volatile and could fluctuate
      widely in response to many factors, including:





-
      announcements of the results of our operations or the operations of our
      competitors,





-
      developments with respect to intellectual property rights,





-
      announcements of technological innovations by us or our competitors,





-
      announcements of new services, products or new contracts by us or our
      competitors,





-
      actual
      or anticipated variations in our operating results due to the level of
      development expenses and other factors,





-
      changes
      in financial estimates by securities analysts and whether our earnings meet
      or
      exceed such estimates,





-
      conditions and trends in the online digital music distribution or production
      industries,





**-** new
      accounting standards,





-
      general
      economic, political and market conditions and other factors, and





-
      the
      occurrence of any of the risks described in this Report.




**We
      cannot control many of these factors, and we believe that period-to-period
      comparisons of our financial results will not necessarily be indicative of
      our
      future performance.**





In
      addition, the stock market in general, and the market for apparel companies
      in
      particular, has experienced extreme price and volume fluctuations that may
      have
      been unrelated or disproportionate to the operating performance of individual
      companies. These broad market and industry factors may seriously harm the market
      price of our Common Stock, regardless of our operating performance.





**DISCLOSURE
      OF OPINION OF SECURITIES AND EXCHANGE COMMISSION REGARDING INDEMNIFICATION
      FOR
      SECURITIES ACT LIABILITIES**





Insofar
      as indemnification for liabilities resulting from violations of the Securities
      Act of 1933 may be permitted to our directors, officers or controlling persons
      pursuant to the foregoing provisions, we have been informed that in the opinion
      of the Securities and Exchange Commission such indemnification is against public
      policy as expressed in the Securities Act of 1933 and is, therefore,
      unenforceable.





Our
      ability to succeed will depend on the ability of our management to control
      costs. We have used reasonable efforts to assess and predict costs and expenses
      based on experience of our management. However, we have a short operating
      history upon which to base predictions. Implementing our business plan may
      require more employees, equipment, supplies or other expenditure items than
      we
      have predicted. Similarly, the cost of compensating additional management,
      employees and consultants or other operating costs may be more than our
      estimates, which could result in sustained losses.





40




**ITEM
      3. CONTROLS AND PROCEDURES**





The
      Company maintains disclosure controls and procedures (as defined in Exchange
      Act
      Rule 13a-15(e)) that are designed to assure that information required to be
      disclosed in its Securities Exchange Act of 1934 reports is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission's rules and forms, and that such information is accumulated
      and communicated to management, including the Chief Executive Officer and Chief
      Financial Officer, as appropriate, to allow timely decisions regarding required
      disclosures.





In
      designing and evaluating the disclosure controls and procedures, management
      recognizes that any controls and procedures, no matter how well designed and
      operated, can provide reasonable assurance only of achieving the desired control
      objectives, and management necessarily is required to apply its judgment in
      weighting the costs and benefits of possible new or different controls and
      procedures. Limitations are inherent in all control systems, so no evaluation
      of
      controls can provide absolute assurance that all control issues and any fraud
      within the company have been detected.





As
      required by Exchange Act Rule 13a-15(b), as of the end of the period covered
      by
      this report the Company, under the supervision and with the participation of
      our
      Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
      of the Company's disclosure controls and procedures. Based on this evaluation,
      our Chief Executive Officer and Chief Financial Officer concluded that the
      Company's disclosure controls and procedures were not effective as of that
      date.




Specifically,
      this conclusion was based on the fact that we filed our 10QSB beyond the
      extension period. We believe this primarily to the small size of our operations
      in general and the size of our accounting department in particular. As a result
      of our limited financial resources, to date, we have been unable to expand
      the
      accounting department. However, we believe that as our financial situation
      improves, we will be able to hire additional accounting personnel and we intend
      to do so as soon as possible. We believe that these steps will enhance our
      financial disclosures. It should be noted that the design of any system of
      controls is based in part upon certain assumptions about the likelihood of
      future events, and there can be no assurance that any design will succeed in
      achieving its stated goals under all potential future conditions, regardless
      of
      how remote. In addition, we reviewed our internal controls, and there have
      been
      no significant changes in our internal controls or in other factors that could
      significantly affect those controls subsequent to the date of their last
      valuation.





There
      was
      no change in the Company's internal control over financial reporting during
      the
      Company's most recently completed fiscal quarter that has materially affected,
      or is reasonably likely to materially affect, the Company's internal control
      over financial reporting.




41




**PART
      II— OTHER
      INFORMATION**





Item
      1.
      Legal Proceedings





The
      Company is periodically involved in legal actions and claims that arise as
      a
      result of events that occur in the normal course of operations. The Company
      is
      not currently aware of any formal legal proceedings or claims that the Company
      believes will have, individually or in the aggregate, a material adverse effect
      on the Company's financial position or results of operations.




Item
      2.
      Unregistered Sales of Equity Securities and Use of Proceeds





The
      use
      of proceeds from the following financings were primarily for working capital
      purposes and the repayment of $427,800 of promissory notes.





*Debt
      Issued with Stock Purchase Warrants─Fair Value of Warrants Recorded as
      Additional Paid-in Capital*





In
      the
      six month period ending June 30, 2006, the Company issued $2,024,600 of new
      convertible securities in private placements to qualified buyers and accredited
      investors investment units consisting of notes and warrants. The fair value
      of
      the warrants at the time of issuance, which was determined using the
      Black-Scholes option-pricing model, was recorded as additional paid-in capital
      and reduced the carrying value of the Notes. The discount on the Notes is being
      amortized to interest expense over the term of the Notes.





a)
      In
      January 2006, a convertible note financing arrangement in the amount of $25,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in March
      2007, and in connection with this financing issued a 1 year warrant for the
      purchase of 100,000 shares at a price of $0.25. The note plus accrued interest
      was repaid in February 2006.





b)
      In
      January 2006, a convertible note financing arrangement in the amount of $3,600,
      convertible at $0.25 per share, with interest at 10% per annum, due in January
      2007, and in connection with this financing issued a 3 year warrant for the
      purchase of 14,400 shares at a price of $0.25. The note plus accrued interest
      was converted in May 2006.





c)
      In
      February 2006, a convertible note financing arrangement in the amount of $1,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in August
      2006, and in connection with this financing issued a 3 year warrant for the
      purchase of 4,000 shares at a price of $0.25.





d)
      In
      February 2006, a convertible note financing arrangement in the amount of
      $500,000, convertible at $0.25 per share, with interest at 10% per annum due
      in
      August 2006, and in connection with this financing, issued a i) 2 year warrant
      for the purchase of 2,000,000 shares at a price of $0.25, ii) in April 2006
      a 2
      year warrant for the purchase of 2,000,000 shares at a price of $0.25, iii)
      in
      connection with this financing, as compensation for a third party’s guarantee,
      issued 1,000,000 shares of common stock, and a 2 year warrant for the purchase
      of 1,000,000 shares of common stock at an exercise price of $0.25 per share.





e)
      In
      April 2006, a secured convertible note financing arrangement in the amount
      of
      $750,000, convertible at $0.25 per share, with interest at 10% per annum, due
      in
      April 2007, and in connection with this financing issued i) a 3 year warrant
      for
      the purchase of 3,000,000 shares at a price of $0.25 ii) a 9 month unit purchase
      warrant consisting of a right to purchase 3,000,000 shares of Sub-Urban common
      stock at a price of $0.25 per share by January 18, 2007, plus a 3 year warrant
      for the purchase of 1,500,000 shares of common stock at an exercise price of
      $0.50 per share.





f)
      In May
      2006, a convertible note financing arrangement in the amount of $295,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in May
      2007,
      and in connection with this financing issued i) a 3 year warrant for the
      purchase of 1,180,000 shares at a price of $0.25 ii) a 9 month unit purchase
      warrant consisting of a right to purchase 1,180,000 shares of Sub-Urban common
      stock at a price of $0.25 per share by February, 2007, plus a 3 year warrant
      for
      the purchase of 590,000 shares of common stock at an exercise price of $0.50
      per
      share.




The
      Company also issued the following promissory notes to in private placements
      to
      qualified buyers and accredited investors.





a)
      In
      January 2006, a convertible note financing arrangement in the amount of $50,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in January
      2007. The note plus accrued interest was repaid in April 2006.





b)
      In
      February 2006, a convertible note financing arrangement in the amount of
      $100,000, convertible at $0.25 per share, with interest at 10% per annum, due
      in
      February 2007. The note plus accrued interest was repaid in April
      2006.





42





Note
      Conversions to Common Stock: In May
      and June 2006, convertible note holders converted $910,931, consisting of
      $796,100 of principal, and $114,831 of accrued interest into 3,012,325 shares
      of
      common stock. $764,685 of principal and accrued interest conversion adjusted
      price of approximately $0.31503, and $146,246 of principal and accrued interest
      converted at $0.25.





Item
      3.
      Defaults Upon Senior Securities





None.





Item
      4.
      Submission of Matters to a Vote of Security Holders





None.





Item
      5.
      Other Information





None.





Item
      6.
      Exhibits





(a)
      Exhibits





4.1
            Form
                of Promissory notes for secured convertible financing and warrants
                for
                $750,000 for Vision Capital on April 18, 2006.





4.2
            Form
                of Promissory notes for convertible financing and warrants for Curtis
                Campbell on May 17, 2006 for $25,000, Southwest Marketing on May
                23, 2006
                for $50,000, and Jdabbco on May 23, 2006 for
                $220,000.





4.3
            Form
                of Promissory notes for convertible financing and warrants for Vision
                Capital $100,000 on May 26, 2006, Vision Capital $50,000 on June
                23, 2003
                and Paragon $150,000 June 30, 2006, included in the $850,000 bridge
                financing completed August 9, 2006. (incorporated by reference to
                8k dated
                May 26, 2006 and filed August 10, 2006)




10.1
            Sub-Urban
                Brands, Inc. Lease for premises at 8723 Bellanca Ave. Los Angeles,
                CA
                August 21, 2006 (incorporated by reference to 8k dated August 18,
                2006 and
                filed August 18, 2006)




10.2
            Agreement
                by and between Sub-Urban Brands, Inc. and Trilogy Capital Partners,
                Inc
                for investor relation services (incorporated by reference to 8k dated
                May
                31, 2006)





31.1
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act





31.2
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act





32.1
            Certification
                of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act





32.2
            Certification
                of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act





43




SIGNATURES





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.





Date:
      August 24, 2006


**Sub-Urban
              Brands,
              Inc.**By:
            /s/
              Joseph
              Shortal
            
            
            By:
            /s/
              Jack
              MottJoseph
              Shortal, Chief Executive Officer
            
            
            
            Jack
              Mott, Chief Financial Officer, Chief Operating
              OfficerPrincipal Executive Officer
            
            
            
            Principal
              Financial and Accounting Officer




44




INDEX
      TO
      EXHIBITS




Exhibit
                Number
              
              Description4.1
              
              Form
                  of Promissory notes for secured convertible financing and warrants
                  for
                  $750,000 for Vision Capital on April 18, 2006.4.2
              
              Form
                  of Promissory notes for convertible financing and warrants for
                  Curtis
                  Campbell on May 17, 2006 for $25,000, Southwest Marketing on May
                  23, 2006
                  for $50,000, and Jdabbco on May 23, 2006 for $220,000.4.3
              
              Form
                  of Promissory notes for convertible financing and warrants for
                  Vision
                  Capital $100,000 on May 26, 2006, Vision Capital $50,000 on June
                  23, 2003
                  and Paragon $150,000 June 30, 2006, included in the $850,000 bridge
                  financing completed August 9, 2006. (incorporated by reference
                  to 8k dated
                  May 26, 2006 and filed August 10, 2006)10.1
              
              Sub-Urban
                  Brands, Inc. Lease for premises at 8723 Bellanca Ave. Los Angeles,
                  CA
                  August 21, 2006 (incorporated by reference to 8k dated August 18,
                  2006 and
                  filed August 18, 2006)10.2
              
              Agreement
                  by and between Sub-Urban Brands, Inc. and Trilogy Capital Partners,
                  Inc
                  for investor relation services (incorporated by reference to 8k
                  dated May
                  31, 2006)31.1
              
              Certification
                  of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act31.2
              
              Certification
                  of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act32.1
              
              Certification
                  of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                  Act32.2
              
              Certification
                  of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                  Act




45